Japan Back in the Limelight

In the Asian time zone, Japan has stepped into the limelight in terms of crypto trading growth this year. The chronology of events that contributed to this explosive growth can be summed up as follows:

1) Restrictive policy in our neighboring countries of China and Korea towards cyrpto currency trading and ICOs at the beginning of the year. This led to a massive shift to trading originating in JPY because of the same time zone.

2) A series of very accommodative legislation change in Japan over the course of this year (Virtual Currency Act, Consumption tax exemption for bitcoin trading, FSA approval of 11 crypto currency exchanges in Japan). This gave the official stamp of approval from the Japanese government.

3) Announcements of development of “off-chain” bitcoin products such as ETFs and derivatives, giving it a mainstream “go sign”.

The stars all aligned, so to speak, and has helped catapult the volume of Bitcoin trading originating in Japanese yen.

Hidden Cash

Another interesting perspective of large volumes of Bitcoin trading in Japan, I believe, is a cultural/social one. Japan has one of the world’s largest amount of private wealth (1800 trillion yen), but most of it is locked up in cash and bank deposits. Around 50% of Japanese wealth is in cash/deposits vs about 15% equity markets. In the US, for example, it is almost a mirror image where about 50% is in equity and only 15% in savings. Japan has an image of being extremely risk averse towards investing, and in society it is rather taboo to openly talk about “money” and “wealth”. In addition, 80% of this cash wealth is held by people over the age of 50. It certainly paints a very very conservative picture in terms of Japanese appetite for investing and risk.

Don’t Tell the Neighbors

There is an interesting cultural spin to this , however — in Japanese society there is this thing called 本音と建前 (Honne and Tatemae). It literally means, “true feelings/thoughts” and “public face”. Living in Japan we are always acutely aware of these two different “faces”, and for foreigners it can be very frustrating when they are told “yes” in a business meeting, when the Japanese really mean “maybe” or sometimes even “no”.

My point is, despite the “risk averse and conservative” public image of Japanese people, the reality is the “true feeling” is that they have a massive interest to trade and gamble. One clear example is the pachinko industry, which is by far the world’s biggest gambling market (23 trillion yen vs. global casino market combined of 19 trillion yen). Another example is the FX margin trading market. Daily volumes could be around 180 billion dollars in Japan vs. crypto currency trading globally of 10 billion dollars. It is hard for me to even imagine, but many people in Japan secretly seem to be addicted to the adrenalin rush of hitting the jackpot, the sound of those pachinko ball pouring out of the machines, or watching their investments increase in value on the screen.

So, I think the explosive growth in Japan of recent can be explained by these two factors; shifts in policy approach in the Asian region and Japanese government “approval”, plus the Japanese cultural propensity to secretly love gambling which is not obvious to people not familiar with the 本音 (Honne) and 建前 (Tate Mae) of Japanese society.

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