Gold Demand in Japan Tripled Amid Abenomics as Prices Slumped

Feb 18, 2014 1:00 am ET

Feb. 18 (Bloomberg) -- Gold demand in Japan jumped threefold in 2013 as prices slumped and investors sought refuge from Prime Minister Shinzo Abe’s campaign to stoke inflation and weaken the yen, the World Gold Council said.

Demand for jewelry, bars and coins increased to 21.3 metric tons last year from 6.6 tons in 2012, the London-based council said today in a report. Demand for jewelry rose 5.4 percent to 17.6 tons and Japan became a net buyer of bars and coins for the first time since 2005 with 3.7 tons of purchases, it said.

Gold in London slid 28 percent last year, the most since 1981, as some investors lost faith in the commodity as a store of value and as the Federal Reserve said it would slow stimulus. Lower prices, the yen’s 18 percent drop last year against the dollar and a looming sales tax increase helped boost bullion’s appeal as a haven in Japan.

“Inflation-hedging was a key driver of this upsurge as ‘Abenomics’ seemed to be stimulating domestic inflation,” the council said in the report. The weaker yen also underscored investment demand, as local prices recovered from the lows hit midway through the year, it said.

Japan plans to raise the sales tax to 8 percent from 5 percent in April to address the nation’s swelling public debt.

“The prospect of the higher sales tax has encouraged consumers to make pre-emptive purchases, where possible, to avoid paying the higher rate,” the council said.

Tanaka Kikinzoku Kogyo K.K., Japan’s biggest bullion retailer, said last month that its bullion sales surged 63 percent to a five-year high in 2013, exceeding purchases for the first time since 2004.

The precious metal priced in yen fell 13 percent last year. Futures for delivery in December on the Tokyo Commodity Exchange rose 0.5 percent to 4,354 yen per gram ($1,319 an ounce) at 12:56 p.m. in Tokyo. The most-active contract touched a record 5,081 yen on Feb. 7, 2013.

Gold for immediate delivery in London dropped 0.5 percent to $1,322.72 an ounce.

--Editors: Jarrett Banks, Brett Miller