Page 34 - Bullion World Volume 4 Issue 2 February 2024

Bullion World | Volume 4 | Issue 2 | February 2024

became an unintended incentive for both individuals and
large-scale criminal organizations to engage in extensive
smuggling.

The two primary drivers behind Japan's gold exports
were long liquidation of gold at higher yen prices and Several factors contribute to this evolving
widespread smuggling. The government responded attitude towards gold in Japan:
with stringent measures, instructing businesses
not to purchase gold lacking proof of officially paid 1. Generational Shift:
consumption tax. While smuggling persists to some The primary buyers of gold in the 1980s and
extent, its influence on the Japanese gold market is 1990s, the older generations, are exiting the
gradually diminishing. scene and selling their gold. Simultaneously,
a younger demographic, largely unaffected by
historical gold prices, is entering the market. A
Presently, gold commands more attention in Japan
than ever before. The trajectory from 1971, when US significant shift in investor demographics has
President Nixon severed the dollar's link to gold, to the occurred, with investment seminars that once
present, where gold hovers around $1,980 per troy saw over 90% attendance from older individuals
ounce, exemplifies a staggering 57-fold increase in now welcoming a much younger audience.
value against the US dollar. The unprecedented rise
underscores a natural process – global governments’ 2. Continued Yen Depreciation:
freely printing fiat money while gold supply remains The Japanese yen, which began the year
constrained. at 131 yen to the dollar, has depreciated to
150 yen, constituting an approximate 8.7%
devaluation against the US dollar. Coupled with
Historically, significant selling and buying patterns in the
Japanese gold market were observable. Notably, there inflationary pressures, this depreciation has
were substantial gold sales when the price surged by raised concerns among Japanese investors
500 yen per gram, with long queues of sellers at major about holding yen in their bank accounts. While
retail shops. Conversely, during market declines, queues older generations traditionally favoured the
formed with eager buyers seeking to capitalize on lower safety of bank deposits, the erosion of yen value
prices. This pattern, rooted in the tendency of Japanese has prompted a revaluation, with an increasing
investors to hunt for bargains, formed the basis of a number of investors viewing gold as a hedge
simple yet consistently profitable trading strategy during against both inflation and yen depreciation.
my time at a trading house. Despite higher gold prices, investment in gold
continues to rise.
This traditional bargain-hunting inclination of Japanese
investors, however, has undergone a paradigm shift 3. Introduction of the New NISA Account:
in recent years. Even with gold prices in yen reaching The Nippon Investment Saving Account
unprecedented levels, there is a surprising absence of a (NISA), introduced in 2014, mirrors the English
surge in selling from gold holders. Notably, retail shops ISA model. Individuals utilizing NISA enjoy
report a well-balanced mix of sales and purchases at exemption from the 20.315% tax on trading
their counters. In the realm of gold exchange-traded profits. Originally capped at 1.2 million yen with
funds (ETFs), a departure from the trend observed in the a five-year duration, the current NISA account
US and Europe becomes apparent. While holdings in is set to conclude this year. The new iteration,
these regions decrease, Japanese gold ETFs continue to effective from 2024, raises the investment
increase their holdings despite historically high prices. limit to 18 million yen per individual with no
time constraints. This strategic governmental
move aims to redirect funds from dormant
In conclusion, the Japanese gold market bank deposits into investments. The enhanced
is undergoing a profound paradigm framework has led to a surge in interest, with
shift, characterized by changing investor more investors opening current NISA accounts
and preparing for the expanded framework in
demographics, heightened concerns about 2024. The new NISA will encompass various
yen depreciation, and the introduction precious metals, including gold ETFs, reflecting
of new investment avenues such as the a broader investment landscape. This initiative
expanded NISA framework. As gold has sparked a significant shift in investor
continues to capture the imagination of a sentiment and behaviour, contributing to the
new generation of investors, the narrative of evolving landscape of the Japanese gold
market.
Japan's gold market unfolds as a dynamic
and ever-evolving story.

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