Japan's gold imports surge 7-fold BOJ stands pat; Rubin urges BOJ to set inflation target By Bill Clifford, CBS.MarketWatch.com Last Update: 7:39 AM ET March 20, 2002
TOKYO (CBS.MW) -- An interesting nugget in Japan's latest trade data. And an interesting nudge from former U.S. Treasury Secretary Robert Rubin.
The nugget: Japanese investors imported 19,754 kilograms of gold in February, up a stunning 662 percent from the same month last year, according to the government's trade report Wednesday.
This month, says Itsuo Toshima, regional director of the World Gold Council, gold buying in Japan "has slowed, although (is) still double to triple year-to-year in March."
Toshima says the recent Tokyo stock market rally has lent "a sense of temporary relief." The Nikkei Average fell 2.3 percent Wednesday. See Asia Markets.
The surge in gold imports "can be attributed to the Bank of Japan's aggressive monetization of government debt, which, if left unchecked, will result in the elimination of deflation and the start of inflation," said Ken Landon, currency strategist at Deutsche Bank in Tokyo.
"Japanese citizens are clearly losing confidence in the monetary policy of the BOJ and are buying gold to protect against a potential meltdown in the value of the yen," he said.
Foreign exchange trading was quiet, with the Japanese currency trading in a tight range, between 132 yen and 132.42 yen against the dollar. The yen (C_JPY: news, chart, profile) has weakened sharply from its recent March 7 high, when the dollar bought just 126.36 yen. Now, each dollar buys more yen -- 132.22 yen at the end of the trading day, a bit shy of the 50-day moving average at 132.56.
The BOJ's nine-member policy board decided by majority vote to keep monetary policy unchanged. Wrapping up a two-day meeting Wednesday, the central bank's board left its target of commercial bank overnight deposits in a 10 trillion yen to 15 trillion yen range. The BOJ also kept its monthly outright purchases of Japanese government bonds at 1 trillion yen ($7.57 billion).
After the vote, Robert Rubin, who is visiting Tokyo in his capacity as chairman of the executive committee of Citigroup (C: news, chart, profile), told Japanese Prime Minster Junichiro Koizumi the central bank should set an inflation target.
Koizumi in turn appealed for U.S. understanding of the central bank's attempt to boost prices through its credit-easing policy, Liberal Democratic Party Secretary General Taku Yamasaki told reporters, according to Kyodo News. Yamasaki had also attended the meeting.
Yamasaki said Koizumi is sticking to his policy of holding new bond issues to 30 trillion yen annually, from the fiscal year beginning April 1.
According to the Kyodo report, Rubin told Koizumi that interest rates on long-term bonds could rise excessively if Japan were to issue new government bonds without such a limit.
Bill Clifford is Asia bureau chief of CBS.MarketWatch.com.