Gold Soars In Japan Bridging for Inflation

by on January 22, 2014 7:38 pm BST

Not everyone may be so enthusiastic to fuel inflation as Japanese Prime Minister Shinzo Abe and Bank of Japan (BoJ) Governor Haruhiko Kuroda. Gold sales have skyrocketed in Japan with individual investors hedging for the increase in consumer prices. Gold sales at Japan’s largest bullion dealer increased 63 percent, a five-year high, in 2013.

Tanaka Kikinzoku Kogyo K.K had sales of 37.3 metric tons of gold bars last year, compared to 22.9 tons in 2012. The bullion dealer saw sales exceed purchases for the first time since 2004. Asia still represents the largest demand in the precious metal, but gold bullion is gaining luster since the 18 percent decline in the yen during Abe’s tenure.

Chief analyst at Fujitomi Co., a commodities broker, Kazuhiko Saito said “gold has been very attractive to individual investors as a hedge against inflation.” Even though the Nikkei had blasted upward in 2013, Saito said investors could be losing confidence in Abe’s economic policies, commonly known as Abeconomics. Kate Harada, general manager for Tanaka Kikinzoku, said that the decision for Abe to raise sales taxes from five to eight percent this April sparked bullion buying.

Abe plans to raise the sales to 8 percent from 5 percent in April to address the nation’s swelling public debt also encouraged gold purchases by local investors in 2013, said Kate Harada, general manager of the precious metals department at Tanaka Kikinzoku, a unit of Tanaka Holdings Co.

Consumer prices have risen quickly in Japan, and market participants are skeptical is the BoJ can exit quantitative easing without a resulting crisis and whether or not inflation becomes hyperinflation. Japanese consumer prices rose from minus .7 percent to a current reading of 1.2 percent.

Japan is quickly reaching public debt that rivals the United States at $10.49 trillion, or a debt-load of one quadrillion yen. Gold could be a safe investment for the future.