Page 32 - Bullion World Volume 5 Issue 06 June 2025

Bullion World | Volume 5 | Issue 06 | June 2025

used to be elders – like way above 60s who hold the same kind of amount of gold exported in
gold from a long time ago. As they were bargain 2024. This is purely because of smuggling. Why
hunters, these recent price rallies were quite good smuggling? Because of the consumption tax.
opportunities to liquidate their longs and get out of
the investment market as they were entering ages Japan introduced a value added tax called
to use what they had built. Consumption tax in 1989. It started at 3% and
rose to 4% in 1994, 5% in 1997, 8% in 2014 and
After Covid, the main generations of investors finally 10% in 2019. Consumption tax applies to
changed to younger generations. They are from everything including gold. But the tax is borne
late 20s to 60s. Lot of the younger generation don’t by the final consumer, that means when you sell
know the era when gold was around 1000 yen/ gold, the tax would be borne by the buyer, and you
gram. For them gold is around more than 15000 receive consumer tax back. The retail gold price
yen per gram, and they take it as it is. As they have includes consumption tax both the shops’ offer
not experienced those cheaper days, they are not and bid.
afraid of heights. What they fear is devaluation of
the Japanese yen. After the Covid when the world Japanese retail gold price currently is 10% higher
is open, they experienced the loss of the value of than global price due to the tax. That means if you
their currency against other foreign currencies bring gold from foreign countries where there is no
and felt the inflation quite acutely eating their yen’s tax over gold and sell it in Japan you automatically
value. get 10% more on the gold price. You must declare
the gold you bring in at customs and pay 10% tax.
Younger generations began to feel this trend and Smuggled gold is the gold brought in without tax
they realized they must do something to protect declaration and targeted to take this 10% by
their wealth. Luckily the Japanese government doing so.
had changed its NISA non-tax account threshold
to much higher level to total of 18 million yen from The government is trying hard to avoid this crime
only 1.2million yen on 1st of April 2024. All these but criminals always find loopholes in the system.
situations ushered young and old investors and Most of Japanese Gold market players try not
even non-investors into investment. Gold funds and to buy those smuggled gold but there are some
ETFs could be traded under NISA account without who buy with half eye closed. Once those bars
tax. Thus, new money keeps coming into gold are melted down, nobody can tell the difference
funds, gold ETFs and although not a NISA product, and those gold are exported in tons to Hong
physical gold. Since 2024 the AUMs of those Kong and Singapore in huge amount. Those gold
products keep going up while US and European would be coming back to Japan in smuggling
market AUM of the gold ETF have been trending again and the loop is repeated forever. Japan is
lower as the US interest rates are hovering around losing money because it levies consumption tax on
5%. In very good contrast to North American and gold. Personally, I assume this will continue until
European gold investment, both Japanese Gold Japanese government abolish consumption tax on
ETFs and Gold funds are adding on their AUM gold but it is quite difficult to change the existing
continuously. taxation politically. Smuggling will continue to be a
big headache for the Japanese gold market
and Japan.
2. GOLD SMUGGLING CONTINUES
TO BE A BIG HEADACHE.

As I mentioned above, we are seeing good
investments in gold now. But despite the robust
domestic demand, Japan remains a big exporter
of gold. We have only one minor gold mine in
Kagoshima called Hishikari gold mine which
produces about 4 tons a year. Still Japan exports
more than 120 tons gold in 2023 and most likely

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