March 27, 2014 4:31 am JST

Imminent sales tax hike sparks gold rush in Japan

TOKYO -- Gold ingot sales have taken off among buyers who view the precious metal as an attractive investment before the 5% consumption tax jumps to 8% this April.

     Investors seeking short-term profits from the difference between the old and new taxes are flocking to gold. So are buyers who see the metal as a safe haven from an uncertain future.

     A recent decline in market prices has also fueled buyer interest. Gold futures in New York, a benchmark for international prices, have hovered around $1,310 per troy ounce, down 5% from the recent peak hit March 14. Retail prices in Japan were at 4,590 yen ($44.42) per gram Wednesday, down from 4,769 yen on March 14.

     The top seller is ingots of 500 grams, according to precious-metals specialist Tanaka Kikinzoku Jewelry. The ingots carried a retail price of around 2.3 million yen Wednesday. The company's main store, in Tokyo's tony Ginza shopping district, has lately welcomed more than 100 customers a day seeking to purchase gold ingots. About 150 dropped by Wednesday.

     At seven directly run stores of Tanaka Kikinzoku Jewelry, gold ingot sales volume shot up 380% on the year for the period from March 1 to March 25. Ishifuku Metal Industry, a Tokyo-based vendor of precious metals, has seen ingot sales this month surge 60% compared with February.

     The new 8% consumption tax will apply to gold at the time of sale. So many are rushing to purchase gold at the current rate of 5% in hopes of selling it after the hike for a profit equivalent to the 3 percentage point difference.

     But investing in gold can pose risks, including price swings. In addition, precious-metals vendors usually set their purchase prices lower than their sale prices.

     Not all buyers are purchasing gold with the short term in mind.

     "Many are opting to keep their gold for the medium to long term," says a marketing chief at Tanaka Kikinzoku Jewelry, citing such investment as a notable characteristic of the current buying spree.

     "Inflation anxiety and other future concerns are spurring a growing number of people to buy gold as a safe asset," says Koichiro Kamei, a financial and precious-metals analyst.