Bitcoin’s price rise in 2017 has been stunning. For an asset linked to no tangible value, the increase in price from $998 on January 1 2017 to hitting a high of $19,497 on December 16 was more than just eye-popping. It created a tangible bitcoin effect on economic growth that, at least in Japan, translates into an impact on quarterly gross domestic product growth “that cannot be ignored,” according to a Nomura report. This is particularly true in Japan, where much of the bitcoin ownership is centered.

Bitcoin effect: Second half of 2017, where most bitcoin gains occurred, primarily benefited Japanese citizens

There is a “wealth effect” thesis that Nomura researchers Yoshiyuki Suimon and Kazuki Miyamoto cite when pointing to increased Japanese GDP in the first quarter of 2018. Working on the assumption that an increase of ¥10 billion in wealth (asset value) boosts personal consumption by ¥0.2 to ¥0.4 billion, the pair expects the rise of bitcoin to result in a tangible economic impact on the island nation.

Japan is particularly exposed to the bitcoin effect. A December 14 Deutsche Bank report, looking at the amount of bitcoin trading in yen, said it was Japanese currency speculators that were primarily “holding up” the price of bitcoin. A December 11 Nikkei report had earlier pointed to 40% of cryptocurrency trading being denominated in yen.

In their December 29 report, Nomura’s Suimon and Miyamoto take a more nuanced approach, first noting the trend of increased Japanese speculation. Since the April 2017 Payment Services Act went into effect in Japan, essentially allowing cryptocurrency trading, yen-based trading has taken off.

Early in 2017, the Chinese Yuan dominated cryptocurrency trading. But when the Chinese government clampdown on such speculation, bringing it to a near halt, the Japanese have picked up the action. It is the second half of 2017 where the primary gains made through the bitcoin effect were witnessed – right in the Japanese wheelhouse.