The structural problems with the Japanese economy are well known. Instead of confronting them head on, Japan’s policy makers opted to print gobs and gobs of Yen. Three decades later, Japan is no closer to salvation.
The Bank of Japan (BOJ) has tried every trick in the book. Through its asset purchase programs, the BOJ has destroyed the Japanese Government Bond (JGB), Equity, and FX markets in Japan. Unfortunately, prime minister after prime minister believed that the BOJ was not aggressive enough. If only they printed more money and bought more assets, Japanese people and corporates would begin spending once again.
The demographic challenges of an aging population compounds the monetary issues. If you are old and on a fixed income, the BOJ is slowly destroying your life. The yield on JGBs is paltry. This is the major asset that Japanese pension funds hold.
Compounding these issues, Japan imports a majority of its energy and goods. As Abe-san and Koruda-san have trashed the yen, the cost of imported goods have soared in Japan.
BOJ wants to turn a nation of savers into rampant speculators. The preferred casino is the domestic equity market. While trading stocks is fun, trading FX with massive leverage is bliss. The Japanese love leveraged FX trading. The fast internet and high smartphone penetration means they are well equipped to day-trade FX.
The onset of negative interest rates in Japan has pushed the FX punters into overdrive. Japanese investors are hungry for any asset that can be used to store wealth. Bitcoin is the perfect antidote for Japan. At its heart it is just another FX pair. But physical Bitcoin has other desirable properties.
Bitcoin is scarce: only 21 million will ever be produced. Bitcoin can be exchanged on free markets for other currencies. And most important, Bitcoin trades 24/7 and can now be trading against Yen with high leverage.
BTCCNY currently is the most important and liquid Bitcoin pair, but that may not be for long. Japanese traders have a vast hoard of money that can be moved into Bitcoin. Japanese traders are wealthier and have more experience trading FX. Once Bitcoin enters Japan, they will give the Chinese a run for their money.