By Michael Scott
The early-stage investment firm Metaplanet is adopting Bitcoin as its reserve asset as Japan bears the brunt experience of fiscal imprudence. The Simon Gerovich-led firm announced it was adding Bitcoin as a reserve asset as the yen bears the pressure of growing debt.
While the yen ranks among the five leading global reserve currencies, its value is plunging as Japan faces a rising debt burden and cyclic volatility. The adoption of Bitcoin to its treasury, akin to Michael Saylor’s MicroStrategy, will help the Tokyo-listed firm hedge against the debt burden.
The IMF data shows that Japan has the highest debt relative to its gross domestic product (GDP) among its developed peers. According to recent IMF data, the country’s debt-to-GDP ratio exceeds 250%.
Metaplanet Replicates MicroStrategy (MSTR) Approach to Acquire Bitcoin
Metaplanet banks on Bitcoin to hedge against the yen volatility. The Metaplanet’s press release on Monday, May 13, explained that the move arises from the sustained economic pressure experienced in Japan. Notably, the Land of the Rising Sun has witnessed elevated government debt levels worsened by the weakening yen and prolonged spell of negative real interest rates.
Metaplanet replicates the strategy adopted by the Nasdaq-listed MicroStrategy (MSTR) that today’s Bitcoin treasury is worth billions of dollars as per Bitcointreasuries.net. In contrast, Metaplanet has bought 117.7 Bitcoins since April, valued at $7.19 million.
Metplanet ranks 31st among the listed entities holding Bitcoin, trailing The Brooker Group and Banxa Holdings, which have 122.3 and 126 Bitcoins, respectively. The amount is miniature to MicroStrategy’s 214,278 Bitcoin valued at $24.4 billion.
Metaplanet has, since unveiling the Bitcoin acquisition initiative, indicated it is ditching Web3 to prioritize Bitcoin treasury and commercial real estate. The transition is inevitable as Japan faces a mounting fiscal crisis, evident in the currency market.
Metaplanet announcing Bitcoin’s addition to the firm’s strategic reserve asset aligns with the crypto advocates who recently hailed the token as a hedge against monetary and fiscal imprudence.
A review of IMF data shows Japan’s debt exceeds 254% to top the advanced world segment. The burden contrasts the US debt-to-GDP ratio that the International Monetary Fund (IMF) estimates at 123%.
The high debt has compelled the Bank of Japan (BOJ) to avert raising interest rates similar to the approach adopted by the Federal Reserve (Fed) and other leading central banks, except Sweden’s Sveriges Riksbank. Higher interest rates typically raise the cost incurred to service debt, a situation Japan would avoid since it would complicate the fiscal issues.
Metaplanet to Acquire Bitcoin to Hedge Against BOJ’s Unsustainable Monetary Paradox
The US Fed has, since the onset of 2022, lifted the interest rates above 5%. Such contrasts with Japan’s benchmark borrowing cost, where the BOJ has retained nearer zero. The move has seen the yen depreciate sharply, affirming that the interest rate differentials have a critical influence on the fiat currency exchange rates.
A review of Trading View data shows that the yen has depreciated by 0.50 against the dollar in the past three years. A recent slip saw the yen test past 155 per US dollar in the process, plunging to a 34-year low.
The recent sell-off prompted the BOJ to deploy a classic intervention by selling US dollars to establish a floor under the yen.
Metaplanet indicated that as the yen tumbles, Bitcoin will constitute its non-sovereign store of value. It offers an opportunity to gain in its appreciation unlike when holding traditional fiat currencies. The firm tore into the BOJ’s strategy to intervene in the foreign exchange markets while sustaining low rates as an unsustainable monetary paradox.
Metaplanet reiterated its resolve to hold Bitcoin long-term to realize taxable gains. Also, the investment firm plots subsequent Bitcoin acquisitions by issuing long-dated yen liabilities.