Pay-as-You-Go Gold-Buying Plan Is Popular in Japan : Investing: Purchases by ‘little guys’ account for 25% of the metal’s imports.
Gold, once the reserve of the rich and titled in Japan, is now a commonplace asset thanks to an innovative marketing plan.
“The age of super-rich people in the 1980s is over. Stable demand from the masses is essential now,” said Yukuji Sonoda, president of Sumisho Gold Co., a precious metals dealer.
More than 300,000 Japanese pay a fixed amount daily to take part in the Gold Accumulation Plan, accounting for 25% of the estimated 100 metric tons Japan imported for investment in 1991.
With new savers joining the plan every month, the proportion could rise to 50% over the next 10 years, assuring a strong, stable source of demand, traders said.
World gold prices, hovering at below $360 an ounce since the beginning of the year, would have been hurt without the demand generated by the plan, they said.
A similar plan has been tried in Germany, Hong Kong and Switzerland but only in Japan has it really gained popularity.
Investors pay as little as $24 a month to join the plan, with the average payment about $96, according to the World Gold Council.
Since the contract is computerized, the monthly investment amount is spread over an average 20 trading days. Gold is purchased each day at the best available price.
Contracts run for a minimum of one year, but usually extend over several years, after which customers can exchange their investment for small bars, coins, jewelry or money.
The plan was introduced in Japan in 1980 but did not take off until almost 10 years later, when two major banks started marketing it in earnest to their thousands of customers.
“Some customers opened the account from the date of their wedding. They do not have a clear investment plan. They are quite satisfied with having such an eternal thing,” said a Fuji Bank Ltd. executive
Many investors have actually had losses, since the price of gold averaged $437 per ounce in 1988. However, those using the plan are doing so as a long-term investment, not for speculation.
“At the moment, I do it for fun. I don’t need a quick result. If I get profit in 15 to 20 years, that’s fine,” said a customer in her 30s.
“The Japanese . . . system is costly but less risky for investors than plans in other countries,” said Naoto Mizuki, manager of the Gold Council’s Japanese investment division. The system makes it possible to buy gold every day for the first time.
It is convenient for investors because payments are transferred automatically from their bank accounts, a common practice in Japan, where electricity, gas and water charges also are transferred from bank accounts automatically.
A total of 22 banks, non-bank financial institutions, trading houses, mining companies and precious metal bullion houses offer the plan.
Banks join for the commission fees and because they believe that it will encourage people to buy gold coins and bars from them. Customers traditionally buy gold in precious metals houses.
“The number of . . . accounts is expected to rise to 400,000 by the end of this year, with another major Japanese bank joining before then,” said the council’s Mizuki.
