Gold rush hits Japan as savers seek out havens
Financial Times; Jan 25, 2002
By BAYAN RAHMAN and ADRIENNE ROBERTS
Last month a customer walked into The Gold Shop in Tokyo's Otemachi district, put Y30m (Pounds 158,000) on the
counter and asked for it to be converted into bullion. He left with 26kg of gold bars.
Two weeks ago, Yoshihiro Matsumoto, head of the gold retail division at Mitsubishi Materials, helped a customer
carry 20 kg of gold out of the shop.
"He and I each carried 10kg in some paper bags he'd brought along. It was a long 10-minute walk to his car," he
says.
This is hardly a typical day's business for Japan's gold retailers. "Normally our customers buy 1kg-5kg of gold, but
recently they're buying in huge amounts," says Mr Matsumoto. "And most people want to take their gold home rather
than have it in a bank deposit box."
With the government planning to curb protection on bank deposits, many savers would rather hold their wealth in
gold than as money in a bank account.
According to John Reade, precious metals analyst at UBS Warburg in London: "This is potentially the biggest gold
demand story of the decade."
With an average nest egg of around Y14m per household, Japanese investors have a high propensity to save. They
also have a reputation for caution. An estimated 45 per cent of their massive Y1,400,000bn savings is held in bank
accounts, with less than 10 per cent invested in the stock market.
The existing deposit insurance regime provides a guarantee that if a financial institution fails, the government will repay
depositors in full. But now, as part of its banking reforms, the government will impose a payout limit of Y10m on
time deposits from April 2002 and on all accounts from April 2003.
"With no safe place to keep savings and other Japanese asset classes looking weak after a 10-year fall in equity prices
and mushrooming government debt, physical gold and other precious metals look very attractive," said Mr Reade.
About 50 small deposit-taking institutions collapsed last year, and Junichiro Koizumi, the prime minister, has said
several times recently that the government would ensure Japan avoided a financial crisis.
"Even though the yen price of gold is going up, people want to buy. And the April change is the main reason for
that," said Yoshiko Mizutani, manager of The Gold Shop. "Customers tell me that even if the price of gold falls, it'll
never fall to zero. But if their bank goes under, they worry their savings could disappear."
Ms Mizutani thinks the recent bank bail-out of Daiei, the supermarket chain, has further undermined people's
confidence in institutions that have been part of the fabric Japanese society for decades.
Since September 11, Japanese investors have become more concerned about currency market volatility. And the
collapse of US energy group Enron undermined confidence in fixed-income assets as many retail investors had put
their savings into money management funds that included Enron bonds. Concern about Argentina's economy has also
rattled investors who bought Argentine Samurai bonds, yen-denominated bonds by an overseas issuer.
Retailers say most of the customers coming in are male and over 50 years old. Many are retired and fear their lifetime
savings will be wiped out if there is a financial crisis. Not all of them live in the big cities. Tanaka, the largest bullion
house, estimates that this month's sales at its 130 affiliated retailers in provincial cities will be five times their January
2001 levels.
But whether Japanese savers' banking fears translate into a boom in gold demand will depend on marketing,
according to Mr Reade. He says bodies such as the World Gold Council will need to ensure that gold and other
precious metals "gain their share of investment" as savers seek out havens. www.ft.com/markets
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