Young Japanese learn about gold -- or maybe just counterparty risk


Young Japanese Boost Gold Buying Amid Recession

By Yasumasa Song
Bloomberg News
Sunday, March 23, 2009

TOKYO -- Young Japanese retail investors are turning to gold purchasing plans at an unprecedented rate as they seek to protect their finances amid a deepening recession, an official at the nation's largest bullion retailer said.

"We've never seen anything like this," said Noriyuki Abe, an executive at the precious metals division of Tanaka Kikinzoku Kogyo K.K. The company has signed up more than 4,000 customers a month for its gold accumulation plan since October. Previously "the tally wouldn't exceed 1,000," he said in an interview.

Financial turmoil has boosted bullion demand worldwide, increasing sales of Austrian Philharmonic gold coins and driving holdings to all-time highs in the SPDR Gold Trust, the biggest exchange-traded fund backed by the metal. Rising interest in long-term investment plans by customers in Japan aged from 20 to 40 "stood out," according to Abe at Tanaka Kikinzoku.

"A slow-and-steady approach to investing is in line with the values of Japanese young people, who emphasize stability in their lives," said Koichiro Kamei, managing director of Tokyo-based Market Strategy Institute Inc.

Tanaka Kikinzoku’s gold accumulation program, started in 1988, allows customers to have as little as 3,000 yen ($31) a month debited from their bank accounts, with many choosing deductions of 10,000 yen. The amount is set in advance, evening out the investment risk over time. The gold is stored by the company on behalf of the investors.

The number of deposits gained by 60,000 in the past year to about 350,000, according to Tanaka Kikinzoku. Almost 40 percent of customers are in their 20s and 30s compared with "extremely low" levels about three years ago, Abe said today.

Gold, viewed by some investors as a haven when asset values drop, rose to an 11-month high of $1,006.29 an ounce on Feb. 20 as a global economic slump deepened. Japan's factory output fell by a record in January adding to evidence the nation's recession may become the worst since 1945. Companies including Sony Corp. and Toyota Motor Corp. have fired thousands of workers.

Mitsubishi Materials Corp., Japan's third-largest copper producer and a bullion dealer, has opened 33 percent more personal gold accumulation accounts in the half-year since September, said Kouichi Saito, bullion trading group manager.

"We didn't think we would see such an increase in accounts because we had assumed that the market was saturated, with those 50 or older being the main customers interested," said Saito.

The gold accumulation plans offered in Japan don't exist overseas, according to Kamei. A proliferation in the products sold by banks and trading houses reflected the popularity of savings deduction plans for paying bills, he said.

Japanese people in their 20s have shown "stronger tendencies to save money" over the past two years, according to surveys by advertising agency Hakuhodo DY Holdings Inc. "They don't own cars because they are expensive to maintain, don't drink much, and don't go on trips abroad," said Yohei Harada, a researcher at Hakuhodo's research and development division.

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