The impact of the Bank of Japan's stimulus policy on Bitcoin has not yet been introduced, causing controversy

Rage Comment : In today's global economic integration, every global event will affect changes in many fields. Previously, people speculated on the impact of Brexit on the country and the world, and the fluctuation of digital currency prices and blockchain technology have also become the focus of people's attention. Recently, many people are concerned about the extent of monetary easing policies that Japan will eventually adopt and its impact on Bitcoin prices. It can be seen that emerging technologies such as digital currencies have been integrated into various fields of society and have become an indispensable part of this symbiotic system.

Translation: Annie_Xu

This year, the Chinese yuan has depreciated, and the United Kingdom has dramatically left the European Union. All these macroeconomic uncertainties have stimulated the rise in the price of Bitcoin, which has increased by more than 50% in half a year.

As August approaches, the factors that have driven bitcoin prices higher are beginning to fade, and market observers are beginning to wonder whether 2016 will bring another global event that will boost the digital currency.

Against this backdrop, the Bank of Japan’s (BOJ) move has left many cryptocurrency market observers speculating on how future news of the central bank’s loosening of monetary policy will affect bitcoin prices.

If the Bank of Japan adopts additional stimulus measures, the purchasing power of the yen may come under more pressure, thus incentivizing market participants to abandon the yen and buy safer haven assets, such as Bitcoin. Of course, speculation about this scenario may have a great influence, because the price of Bitcoin has often been driven up by various speculations in the past.

Most economists polled by Reuters and Citigroup said they expected the Bank of Japan to ease monetary policy further at its July 28-29 meeting.

Of course these people expressed the same sentiments to the media.

For example, Usha Haley, a professor at the International Business at West Virginia University, said the market is still expecting the Bank of Japan to introduce "monetary easing" at its meeting next week, although the specific extent of the adjustment is still unclear.

Fiscal policy

Regardless of which easing policy the central bank ultimately adopts, many experts emphasize the importance of fiscal policy.

Jack McIntyre

Jack McIntyre, CFA and portfolio manager at Brandywine Global Investment Management, said:

"The market wants the Bank of Japan to make major adjustments, otherwise it will be disappointed."

He believes that $94 billion should be injected into the market to achieve the desired positive effects.

"Fiscal stimulus should not be a smokescreen, the government should actually increase financial investment."

Chris Burniske, analyst and head of blockchain products at ARK Invest, also stressed the importance of “active fiscal policy,” noting that it is one of the few options left to stimulate economic growth, as Japan’s interest rate policy and quantitative easing have not been effective.

If the Japanese government decides to adopt an active fiscal policy, this approach could increase the money supply and stimulate inflation by reducing the purchasing power of the yen.

Expert predictions

Although market observers are confident about the Japanese government's stimulus policy, they are divided on how such policy will affect the yen's trend.

Chris Burniske

Burniske discussed this situation, emphasizing that the goal of "active monetary and fiscal policies" is to stimulate growth while bringing inflation.

“Of course, fiat currency inflation makes Bitcoin’s long-term deflationary monetary structure even more attractive.”

Samuel Rines, portfolio strategist and senior economist at Avalon Advisors LLC, an independent registered investment firm, said greater stimulus from the Bank of Japan could further weaken the yen.

However, he noted that markets have already begun to act to offset or capitalize on its impact, meaning the impact of any central bank announcement, including its benefits to Bitcoin, will be limited.

"The market has already started to price in stimulus, so the market reaction should be minimal."

While previous market watchers have talked about the upcoming weakness of the yen, Oana Aristide, senior economist at Dun & Bradstreet in the UK, is focusing on the strength of the yen.

"Our view on the yen is that most factors point to a stronger yen, not a weaker one. Japan is about to launch easier monetary policy as well as huge fiscal stimulus; but neither of them will go beyond Abenomics. It should be noted that the Bank of Japan's biggest recent move (adopting negative interest rates) did strengthen the yen."

Finally, Aristide said that since Japanese officials abandoned the so-called "helicopter money", the company expects the yen to continue to fluctuate, but its overall trend will continue to strengthen compared with other currencies.

Bitcoin’s Impact

However, digital currency market experts are relatively conservative about the impact of these measures on the Bitcoin market.

Petar Zivkovski, head of operations at bitcoin trading platform Whaleclub, described further easing of monetary policy as a bull case for Bitcoin, although they asserted that “the Bank of Japan’s move is not enough to bring about any significant change in Japanese trading activity.”

McIntyre questioned the idea that loose central bank monetary policy would lead investors to flock to Bitcoin.

“I don’t think a weak yen will cause Japan to turn to Bitcoin.”

"A more likely scenario is that it will boost the development of Japan's offshore finance. Expect to see Japanese retail investors chasing yields in countries such as Brazil, Mexico, South Africa and New Zealand."

Burniske stressed that Japan is currently in a "dangerous situation," mainly due to negative interest rates and a poor balance sheet.

Japanese officials are working hard to repair the economy, and we will just have to wait and see what the results are.

The policies of other central banks, such as the Federal Reserve, can also greatly affect the performance of the yen against other currencies.

If Asian countries need to continue with significant stimulus measures, the yen will continue to weaken, causing market participants to abandon the yen and consider possible alternative assets.