Japan's 'invest locally' plan likely to spur demand for assets like bitcoin, gold

Japanese Finance Minister Satsuki Katayama said something early Friday that strengthened the long-term bullish case for perceived store-of-value, limited-supply assets like bitcoin $BTC$64,290.81 and gold, but not without potential short-term pain.

Katayama said the government is actively steering the $2 trillion Government Pension Investment Fund (GPIF), the world‘s largest pension fund, to substantially increase its investments in domestic financial assets, including government bonds. Her comments come as concern about Japan’s above 200% public debt-to-GDP ratio has lifted its bond yields to three-decade highs, putting the yen under pressure.

The plan aligns with the government's broader objective to rebalance household financial assets away from cash and deposits and toward stocks, mutual funds, and bonds.

This fits squarely into financial historian Russell Napier‘s prediction that debt-laden nations will resort to national capitalism (or state-directed capitalism). That is, the government starts forcing domestic savings institutions to buy its bonds and other local assets to cap yields and keep them below inflation. Essentially, fixed-income returns don’t compensate for inflation.

This hidden form of taxation, first used by nations after World War II, allows authorities to finance deficits cheaply, gradually erode the real value of the debt burden through moderate inflation, and avoid the relatively damaging alternatives of outright default or severe austerity. (Other indebted nations like the U.S., U.K. and European countries may do the same soon enough.)

Such an environment creates a strong incentive to seek assets with limited supply that may preserve purchasing power, such as bitcoin and gold. $BTC has already proved its mettle: Housing prices measured in bitcoin look far cheaper than in dollars.

But theres a near-term risk worth noting. The GPIF holds $931 billion in foreign assets, including $232.1 billion in U.S. Treasuries. A slight diversion of capital to local assets may create jitters on Wall Street, potentially breeding risk aversion and selling across all corners of the market, including cryptocurrencies.

For now, however, bitcoin is buoyant, trading above $64,000, with a key momentum indicator signaling a renewed bullish shift in market trend. There are several more key levels between $65,000 and $80,000 that prices need to clear before a full-blown uptrend is confirmed. Stay alert!