The Japanese people have gone through a great deal over the past 30 years, and trust in their government may have finally reached the low point. That is because after years of zero and now negative interest rates, the transference of their retirement accounts to the U.S. in exchange for Treasury debt, and a money printing scheme that has completely destroyed their economy, those with money left are breaking away from the system and buying and offshoring physical gold in vast quantities.
There are three primary reasons why the Japanese populace and investors are fleeing out of Yen based assets and into physical gold. First, because of asset deflation and negative interest rates the Japanese feel there is no investment left besides gold that will protect or grow their wealth within their economy. Secondly, following a recent visit from former Federal Reserve Chairman Ben Bernanke to Japan, the people recognize that the only remaining option for the central bank is to expand the money supply to the point where all assets will become bubble inflated, and wealth will be evaporated from an insolvent currency. And finally, the real threat of asset confiscation, particularly for gold, is now weighing on the minds of the Japanese and why they are choosing to store their gold offshore and in Swiss vault accounts.
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.