Japan has pushed further away from being the nation that embraces "Krugman Era" economics and deeper into the new "Bernanke Era" economics of helicopter money. As a result Japan's citizens have been on a blitz to save what little purchasing power they still possess, before hyperinflation finally arrives.
The gold price is up double digits in the past month and as we said last night, something big is coming as Japan appears to prime itself for "helicopter money". With the Yen soaring and that whole negative rate thing going on, the Japanese savers are understandably concerned about the future of their savings. To be sure, Japan's thirst for gold is hardly new. Back in March, when Japan's yields first turned negative, gold merchants such as Vaultoro reported that gold sales jumped 13% thank to an increase in trading from Japan. Japanese savers and investors have flooded towards gold as a safe heaven after the Japanese central bank made a move to set interest rates into the negative.
Now, they are buying even more.
As Bloomberg reports, in the face of a clear lack of trust in Japanese leadership, local investors are buying gold to store in Switzerland. The reason: they are increasingly worried about confiscation which is why they are storing it half way around the globe. The number of buyers jumped 62% in the first six months from the second half of 2015, Atsuko Sato Whitehouse, head of Japanese markets at the London-based BullionVault investment service, said this week.
The clear action of gold buying comes only months after we reported on the increased demand for safes in Japan. This is what we said back in February: “Look no further than Japan’s hardware stores for a worrying new sign that consumers are hoarding cash--the opposite of what the Bank of Japan had hoped when it recently introduced negative interest rates,” WSJ wrote this morning. “Signs are emerging of higher demand for safes—a place where the interest rate on cash is always zero, no matter what the central bank does.”
However, something has changed, and it is almost as if Japan is expected the ghost of FDR to arrive soon and confiscate their gold.
“Many of our Japanese customers think it’s too risky to hold gold bars at home and they want to keep them in Switzerland because they are anxious about the future of Japan,” Whitehouse said in an interview. The country’s growth has stagnated for a decade, defying fiscal and monetary stimulus which has driven up public debt to more than double the value of annual economic output.
Meanwhile, Japan's customers are right to be concerned about end times, following what is a terminal failure of BOJ central planning.
Rather than weakening, the Japanese currency has climbed in the past year because investors see it as a haven along with government bonds, silver and gold. That’s meant the price of the metal in yen has dropped 2.5 percent over that time even as bullion denominated in dollars has strengthened 17 percent to $1,357.54 an ounce.
The surging yen hasn’t stopped some commentators from predicting a collapse. Yukio Noguchi, a university professor and former Ministry of Finance official whose business books are best sellers, envisages a scenario in which a failure of the country’s economic stimulus could drive the yen to weaken beyond 300 per dollar. That compared with about 101 yen on Friday.
Yukio will, of course, be right in the end.
According to BullionVault, the Japanese investors range from wealthy older businessmen who have experience working abroad and want to shelter their assets, to younger people and women seeking a haven because of increasing global economic and political risks, especially after the British vote to leave the EU. BullionVault sees similarities between the behavior of Japanese investors and their overseas peers, Whitehouse said. Most of its U.S. customers keep bullion abroad because they fret about the risk of confiscation, which happened during the Great Depression in the 1930s. Half of its British clients store their gold overseas, she said.