Japan Sells Gold While Other Nations Buy

Japan is the only major economy where more gold is being sold than bought, according to a study by the World Gold Council, an industry group.

“It has something to do with deflation and national traits,” said Itsuo Toshima, the council’s Japan representative.

With the prices of almost everything falling, people prefer to keep cash on hand rather than buy assets or goods. Even Japan’s institutional investors like pension and hedge funds are less interested in buying gold than those of other nations. They continue to focus on Japanese government bonds as a safe investment despite the country’s world-beating budget deficit.

In Tokyo’s upscale Ginza district, the Tanaka Kikinzoku Kogyo KK bullion house is seeing far more people selling gold than buying it. As of Aug. 22 the firm had bought more than 10 tons of gold during the month while selling only 3 tons. Since 2005 Tanaka Kikinzoku Kogyo has bought more gold than it has sold in Japan.

Since 2006 Japan has exported more gold than it has imported. The volume of exports may even set a record this year, according to analysts.

The selling frenzy in Japan is in stark contrast to the mood in other countries.

Seen as a safe asset in times of financial turmoil, gold prices have jumped on perceptions of a weakening dollar and euro in recent weeks. Demand for gold has increased significantly in Greece, which is in financial crisis, and China, where the public remains uneasy despite the country’s remarkable economic growth.