Abenomics Accelerates Gold Sales in Japan as Inflation Hedge

Jan 22, 2014 1:30 am ET

(Updates with analyst comment in fourth paragraph.)

Jan. 22 (Bloomberg) -- Gold sales by Japan’s biggest bullion retailer surged 63 percent to a five-year high as prices slumped and investors sought refuge from Prime Minister Shinzo Abe’s campaign to stoke inflation and weaken the yen.

Sales of bars to local investors by Tanaka Kikinzoku Kogyo K.K. soared to 37.3 metric tons in 2013, from 22.9 tons a year earlier, the Tokyo-based company said in a statement today. Sales exceeded purchases for the first time since 2004.

Gold in London slid 28 percent last year, the most since 1981, spurring demand in Asia while many investors in the U.S. and Europe lost faith in the metal as a store of value. The yen’s 18 percent drop against the dollar since Abe became leader in December 2012 and a looming increase in the nation’s sales tax help maintain bullion’s appeal as a haven in Japan.

“Gold has been very attractive to individual investors as a hedge against inflation,” said Kazuhiko Saito, chief analyst at commodities broker Fujitomi Co. in Tokyo. “Investors became concerned as Abenomics weakened the yen.”

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 excluding fresh food -- the Bank of Japan’s key gauge -- rose 1.2 percent in November from a year earlier. The government last week raised its assessment of the economy for the first time since September, citing improvements in private consumption and business investment.

Tocom Volume

The precious metal priced in yen fell 13 percent last year. Futures for delivery in December on the Tokyo Commodity Exchange fell 1 percent to 4,170 yen per gram at 3:27 p.m. in Tokyo after touching a record 5,081 yen a gram on Feb. 7, 2013.

The weaker yen has been a boon for Tocom, with the volume of contracts from commodities from gold to rubber climbing 5.4 percent in 2013. Standard bullion futures increased 2.8 percent.

Sales of platinum declined 30 percent to about 5 tons in 2013 from a year earlier, while purchases rose 33 percent to about 6 tons, according to Tanaka Kikinzoku.

Gold for immediate delivery in London was little changed at $1,240.52 an ounce, while spot platinum rose 0.4 percent to $1,456.38 an ounce.

--Editors: Jarrett Banks, Brett Miller