Japanese Now Buying Gold Bullion and ETFs

First switch to net gold bullion buying by Japanese households since 2004...
 
HOUSEHOLDS in Japan – the world's third largest single economy – are turning from net sellers to buying gold bullion for the first time in eight years, according to the country's largest bullion retail chain.
 
Tanaka Kikinzoku had reported net disinvestment by Japanese gold bullion owners every year since 2004. That pattern was confirmed by external data compiled by Thomson Reuters GFMS, the precious metals consultancy based in London.
 
But now – thanks to what economists have dubbed Abenomics, meaning the aggressive quantitative easing and spending program of new prime minister Shinzo Abe – more private savers are buying gold bullion.
 
This is "partly to hedge against their Yen-based assets such as stocks and properties," says Kate Harada, general manager of precious metals at the retail unit of Tanaka Holdings Co.
 
Gold ETFs in Japan are also bucking the global trend, expanding 10% by weight in 2013 to date, even as Western investors reduce their exchange-traded gold trust-fund positions by more than a quarter.
 
Globally, gold ETFs have shrunk below 2,000 tonnes for the first time in 3 years, according to Bloomberg data. But "the drop in gold prices attracted Japanese gold buying," the newswire quotes Osamu Hoshi, general manager at Mitsubishi UFJ Trust and Banking Corp.
 
Mitsubishi launched Japan's first gold ETF in 2010.
 
Despite continued deflation in consumer prices, Japanese households have now expected price inflation of 3% per year since the start of 2013, new survey data last week from the Bank of Japan said.
 
The Yen has lost one fifth of its value against the US Dollar since Abe was elected in December 2012.
 
Savers buying gold bullion with Japanese Yen have seen the price drop 10% since then, significantly less than gold's losses in other major currencies.
 
Priced in the Yen, gold bullion hit fresh 30-year highs as recently as April.
 
The peak for Japanese households gold buying demand came in the late 1990s, when the Bank of Japan – faced with economic depression following the crash in Tokyo real estate and equity prices starting in 1989 – first slashed interest rates to zero and began quantitative easing in a bid to end deflation in consumer prices.
 
Starting last November, the Bank of Japan plans to double its holdings of financial assets to the equivalent of $3 trillion by 2015, creating the money to buy stock-market shares and real-estate ETFs via quantitative easing.
 

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