Japan's economy could get a boost in 2018 from Bitcoin

[NEW YORK] Bitcoin's about to boost the world's third-largest economy, according to analysts at Nomura.

The digital coin's 1,500 per cent rally this year has left crypto-crazed Japanese investors likely sitting on hefty gains that Nomura thinks will spur consumer spending.

"Rises in asset values often result in a rise in consumer spending, too, known as the wealth effect," the team, led by Yoshiyuki Suimon, wrote on Friday. "We estimate the wealth effect from unrealized gains on bitcoin trading by Japanese investors since the start of fiscal year 2017, and estimate a potential boost to consumer spending of 23.2-96.0 billion yen."

The note points out that trading volume in the bitcoin market is roughly 40 per cent yen, which is larger than even the US dollar's share.

Bitcoin has fallen about 25 per cent since closing in on US$20,000 on Dec 18, trading around US$14,500 in New York on Friday afternoon.

Still, Nomura is confident that the share of investors who have benefited is much larger than those who may have lost money due to the recent decline.

"Moreover, the fact that the rise in bitcoin prices was concentrated in 2017 fourth quarter could result in the wealth effect materialising in 2018 first quarter, and if that is the case, we estimate a potential boost to real GDP growth on an annualised quarter over quarter basis of up to about 0.3 percentage points," Nomura said.

BLOOMBERG