Japanese Consumers To Become Net Buyers Of Gold Again After 8 Years

While the largest gold ETF in the Western hemisphere is unloading physical gold, the land of the rising sun is doing the opposite. The biggest ETF in Japan has accumulated 10% of its physical holding this year. Bloomberg writes that “Japanese consumers are poised to become net buyers of gold for the first time in eight years as the yen’s decline and looming inflation drive them to seek refuge in bullion, Bruce Ikemizu, the head of commodities trading in Tokyo at Standard Bank Plc.”

Weakness in the yen driven by a huge monetary government stimulus, incited Japanese people to hedge against inflation. “Bullion is sought here as a hedge against inflation and a rout in financial markets,” Osamu Hoshi said in an interview. He is the general manager at Mitsubishi UFJ Trust and Banking Corp., which introduced the nation’s first gold-backed ETF three years ago. Bloomberg reports that the trading value in Mitsubishi UFJ Trust’s gold ETF on the Tokyo Stock Exchange amounted to 7.23 billion yen in May. It has become the most-traded commodity fund listed in Japan.

That is the type of “behaviour” that is in line with expectations. Nonetheless, the West has seen sharply falling gold prices lately in the midst of unprecedented monetary expansion. Apart from the fact that the investment community does not consider inflation as an immediate threat it appears that the money supply (not be confused with the monetary base) is not growing as fast as the monetary base. That could signal upcoming deflation.

yen_gold_price_2_and_5_year

One should note on the chart that the yen gold price has not declined to the same extent as dollar gold or euro gold. The chart shows a mere 20% decline from yen gold’s all-time high.

Receive these articles per e-mail

Subscribe for the free weekly newsletter and receive 3 papers about physical precious metals investing