The Japanese Are Dumping Their Gold

Wolf Richter's picture

Wolf Richter

In Japan, people who are old enough to have lived it as adults still reminisce about the bubble that blew up in 1989 when the Nikkei almost hit 40,000 (now at 9,045) and when the already sky-high prices of real estate could only go up further. The slide from the top to reality today has been brutal, and a lot of people lost their shirts. A home changed from being an “investment” to being an “expense.” Stocks became toys for traders. And government bonds, because they kept their value though their coupons were practically imperceptible, became the place to go, and by golly, there suddenly were a lot of them, a veritable tsunami of JGBs that is still building momentum and will reach by the end of this fiscal year one quadrillion yen ($14 trillion), 240% of GDP. But there has been one investment, especially since 1999, that has worked out phenomenally well for the otherwise hapless Japanese investor: Gold.

Alas, they’re dumping it. And when they’re dumping it faster than internal demand can absorb it, the surplus is exported and shows up in the trade statistics of the Ministry of Finance: in fiscal 2006, Japan became a net exporter of gold for the first time since the ministry started tracking it in 1988. Net exports rose every year and built into a crescendo in fiscal 2011, ended March 31, when they surged to 135 tons, an astounding 61% jump from fiscal 2010.

The two largest destinations were Britain and Hong Kong, according to the Ministry of Finance trade data. While Japan has a long history of gold mining, current production is small, ranging from 6.8 tons to 8.9 tons annually over the last decade—hence only a negligible factor in the phenomenon of net exports.

The main sellers were individuals. And one wonders why the love affair with physical gold, one of the few profitable investments the Japanese had access to, is ending despite its truly great run since 1999, when it traded at ¥1,000 per gram, to its peak in August 2011 when it traded at ¥4,745 per gram—the month that bullion house Tanaka Kikinzoku Kogyo K.K. said it bought 15 tons of gold from individuals, five times the normal rate.

There may be reasons that are unique to Japan. Worldwide, the run-up in gold prices might have encouraged individuals to sell their physical gold at an ever quicker pace, but that has not taken place on a massive scale. Rather, a highly plausible reason is that inflation and the fear of inflation have been wrung out of the Japanese psyche over the last 15 years, a period that pundits describe as a descent down an infernal "deflationary spiral":



As the graph shows, over the last fifteen years, the Japanese were in fact among the few people in the world enjoying actual price stability, with interchanging periods of minor inflation and minor deflation—as opposed to the 27% inflation per decade that the Fed has conjured up and continues to call, moronically, “price stability.”

The lack of inflation in Japan has much to do with how expensive everything in Japan used to be during the bubble when Japan was an essentially closed-off market. Over the years, under heavy and consistent pressure from the US, Japan cracked open its borders just a smidgen here and there, allowing cheaper imports to appear, gradually and grudgingly, on the shelves. Read.... The Real Reason for Deflation in Japan.

So, gold has been a great investment, but the Japanese no longer see the need to protect their assets against inflation as its ravages have receded into distant memory. With that fear gone, the motivation to hold on to an asset that has had a phenomenal run turns into the irresistible urge to take profits. But there may be another reason:

"Historically, gold flowed to wealthy countries," said Itsuo Toshima, former Japanese representative at the World Gold Council. And a massive gold outflow, he said, is a sign of Japan's "declining economic power."

In the US, life without Fed-inspired inflation is unimaginable, and investors are struggling with it on a daily basis. “My investing model is ABCD: Anything Bernanke Cannot Destroy: flashlight batteries, canned beans, bottled water, gold, a cabin in the mountains,” said David Stockman in an awesome and pungent interview. The director of the Office of Management and Budget under President Reagan said with his usual flair that a "paralyzed" Fed is in its "final days," hostage of Wall Street "robots" that trade in markets that are "artificially medicated." Read the whole interview..... The Emperor is Naked: David Stockman.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
orangegeek's picture

China buying, Russia buying, Japan selling and gold looking bearish.


How very telling.  Communists are just brilliant.

orangegeek's picture

Gold is likely to continue to fall under elliott wave - shows bearish.


We should see the USD push up while this unfolds.

Nachdenken's picture

When stocks, currencies and commodities are tanking, everyone selling, taking profits, clearing stops, who or what gains? Looks like supports being lowered to where they can be held and worked up to window dress the next quarterly results.

Bastiat009's picture

Looking at the market, Brits and Americans are selling their gold too. Actually Brits can barely wait for the London market to open to dump their gold. Usually, American dump lots of gold right at the open of the comex too.

El Yunque's picture

Doesn't it hold radiation well?

And just what the fuck is a "good" investment?

slackrabbit's picture

Dear God

thank you for the japanese gold sellers. Would it be too much to ask for the central banks to do it to?


ps we are all still stacking and take care of bens printer

David Wooten's picture

Perhaps the Japanese are selling their gold in order to buy food, shelter and clothing.

SHRAGS's picture

I am still buying for that very reason, its a lay-away survival plan.

Body of Lies's picture

Their demographics would support your claim. They are retiring sooner and faster than anywhere in the world and they have saved up a great deal but now need to 'spend' it on the act of living with smaller income inflows.

New American Revolution's picture

How can the author of this blog be so blind to a people so destitute that they are selling all the gold they can lay their hands on because it is all they have left.    It is an aged country, dying the death of a thousand cuts over thousands of hours suffered days at a time.   And this is the end.   Like the air being sucked out of the room, the last thing to happen if for the roof to collapse.  Please shut the door on the way out.

TheMerryPrankster's picture

Maybe the political insiders are cashing out.

Emperor Hirohito, portrayed as an innocent “marine biologist,” in reality directed the looting of the national treasures found throughout this large chunk of the world.

These include the wealth of Britain, Netherlands and France, which had moved their gold to Asia “for safety’s sake,” and the national treasures of 13 Asian nations invaded by Japan.

Why they call it Yamashita’s gold is anyone’s guess.

In reality, it was the treasure of Hirohito. Yamashita merely worked for Hirohito.

The royal family was put in charge of supervising the whole process, and as much booty as possible was taken to Japan.

Lord Koos's picture

The conqueror gets the spoils, when has it ever been any different?  Where do you think the USA got much of its wealth?  We just conquered economically more than militarily.

The Alarmist's picture

This is probably nothing more than all those Japanese housewives dumping their gold to cover their losses on carry-trades gone bad.

dlmaniac's picture

"Our investment model is ABCD: Anything Bernanke Cannot Destroy".


Thumb up if you too feel like LOL.

jomama's picture

that's ok with me, i am still a buyer!  

that is, as long as this paper trades for real money...

Freebird's picture

Yen Cross. Come on man, leave your prized Chevy Volt purchase alone & come & add some value.

fredquimby's picture

I see a Fisker Karma was either set alight or erupted in flames in Texas last night.....oooops.

Freebird's picture

Selling gold to meet losses on their Brasil carry trade etc?
It's anotheer liquidity solvency event.

Chinese Busboy's picture

The Japanese are selling their gold and buying adult diapers.

Elderly at Record Spurs Japan Stores Chase $1.4 Trillion -- "sales of adult diapers in Japan exceeded those for babies for the first time last year."

Temporalist's picture

Actually I was going to comment on the aging population as another major factor in the gold sell off.  These people are dying and anyone that inherits any is not seeing the value in keeping it because they don't understand what it is.  I feel sorry for them in so many ways.

Azwethinkweiz's picture

I shat my pants just watching that tsunami hit Japan.

If I lived there, I'd shit my pants each time an earthquake (and they [4.0+] happen almost daily) made the floor and my bowels move.

Azwethinkweiz's picture

I once knew a man who lived modestly. He once went to see his doctor for a routine examination. The doctor informed him that he had cancer and could expect to live no more than 5 years. Over a period of weeks, the man sold all his most prized possessions to purchase all sorts of silly things----action figures, wholesale boxes of Good-n-Plenty (his favorite candy from childhood), he took up smoking cigars and drinking exotic variations of tequilla. Moral of the story: Asbestos got this man. Fukushima Dai-ichi got these people.

Cathartes Aura's picture

your post is the point that immediately springs to my mind as well - these people have been dosed with radiation, obviously more than is admitted to by their captors, "government" or whatever it's called nowadays. . .

I've no idea how many japanese peoples believe the lies they are being fed by their government, but I'm guessing the number of people "cashing in" on their life savings would correspond.

(that this fallout subject barely crosses the mind of the average amrkn is also telling)

Non Passaran's picture

That is pure nonsense.
According to you two geniuses, the rich people's reaction to some secret truth the government doesn't want them to know is that they sell gold and stay in the radioactive Fukishima (and we all know 99pct of Japan gold holders live in the vicinity of Fukushima).

mess nonster's picture

We all live in the vicinity of Fukushima.


Spent fuel rods suspended in leaky tanks 100 feet above ground on tottery stilts.. now THATS deflationary.

Gold has outperformed all other investments in Japan, according to the article. perhaps this is an understatement, and the rich japanese looks at his investment portfolio and sees that gold is the only oinvestment that has performed at all. In other words, he/she has no other source of income. This investor must eat, pay taxes, buy fuel, etc. So, the gold is sold. This movie is coming to play in your town soon. This






matrix2012's picture

Read through below site, Fukushima Diary, which is dedicated to cover and follow up the Fukushima Daiichi NPP disaster and its effects!


Also here:


Food Safety in Japan: One Year after the Nuclear Disaster


- You won't hear this on any mainstream news!!! (Nuclear Fallout)


Nuclear Facts A very clued in professional who will not be bought or intimidated into silence: Dr Helen Caldicott, true to style, tells it as it is.

The research of PROF. BANDAZHEVSKY about Chernobyl's effects



matrix2012's picture

a reader at the washingtonblog's above link posted as follows:

"As a retired construction millwright I’ve built atomic power stations and worked in heavy construction for many years – 40 years or more. The pool in unit 4 is almost sure to collapse enough so that the fuel will burn – that’s my informed opinion after looking carefully at many photographs. I only hope that the burn is not explosive. That can happen.

Assume it will spew. Bet on it.

While mitigation is certainly worth an intense effort it’s really too late. These kinds of events are one-way functions; irreversible.

NRC? At Rancho Seco everybody understood what those letters stood for – Nobody Really Cares…

It’s important to understand that atomic power stations and the damned bomb are parts of the same industry – and that it “makes money” by taking from the public space and selling it back, one way or another. It’s a gimmick, a con."


So the picture of reactor #4 is very bleak, the dire trouble is not yet over, not only for Fukushima people or Japanese in general but the world in whole... time will tell then 

Azwethinkweiz's picture

I can't comprehend any of what you stated. I'm not a genius, you're probably more intelligent than me. Unlike the common cold, radiation poisoning doesn't last 7-10 days. Have you ever had to travel with the rhinovirus? If you take off from Los Angeles and land in Costa Rica, the symptoms are still the same and the virus has to run it's course. It will run it's course. Again, I'm not a genius.

GuyJeans's picture

This article is correct from my observations. Sometimes Ill go into the shops in GInza or Marunouchi when pog spikes up.  There is usually a line and a wait due to the number of people selling. Most of the sellers appear quite well off.     On the days that pog is down, there are just a few buyers and they appear to be just regular people.   A friends`s mother rec'd a gold coin for helping an old man, and she immediately went out and sold it. 

RafterManFMJ's picture

Dunno GuyJeans I put my best Alf Pog on Ebay and recieved no bids. Not even from Japan.

fredquimby's picture

I sold 2 grams gold and 100g silver on ebay last month. Spot +50%. I immediately restocked with 2 g and 200g and a free beer. Nice. ebay rocks. I sold the silver to UK and gold to Malaysia!

Stuck on Zero's picture

What's the big deal?  You save your gold for a rainy day and then you spend it.  Isn't that why ZHers are hording their gold?  Someday when conditions require it you intend to use it. 

Hobbleknee's picture

No, we're dragons.  We hoard it until a knight pries it from our cold, dead hands.

margaris's picture

We plan to leave our gold to the ungrateful, spoiled hands of our childrens children...

Yes, dragons and knights...

Peter Pan's picture

I suppose that selling real estate around Fukushima might be harder than selling gold.

What will they sell next?

narnia's picture

It's coming to the US too, under the category "organic chemicals".  You'll notice a massive increase in that category.


DavosSherman's picture

India's citizens will buy it.  One chart and 1 one chart only says it all:

Cortez the Killer's picture

The answer isnt that complicated, TP

The Japanese are selling their gold because they are broke and need the money.

They are sharp cats, the Japanese, and it has to be killing them.

Freddie's picture

Sharp cats? Sadly - I don't think so. Japan is a dying or even dead country.  The Yakuza are into everything. Japan is totally corrupt and messed up - yet polite place.  Really sad.  I could think of a lot of other shitty countries I would wish this on.  Japan is not one of them. 

imaginalis's picture

Lucky it hasn't happened here

sumo's picture

Yes. Households are using it to fund retirement.

Workforce is shrinking, retirees are getting more numerous. Japanese have been selling their gold for years:

Japan and China: Changing Investment Patterns

Matthew Turner, Precious Metals Strategist, Mitsubishi Corporation International (Europe) Plc

27th September 2010