RAPAPORT... Late this spring, the Japanese media reported that the country had exported more gold than it imported for the first time in its history. Japan’s urban “mines” — in the form of electronic gadgets and appliances — have been said to hoard more gold and other rare metals than South Africa does. It appears that this resource-poor nation is turning into a resource-exporting country.
It has not taken the media long to direct its attention to how the tides have turned. Today, instead of importing, Japanese jewelers are frantically buying up precious metals and diamonds from the public.
Throughout the past decade, when Japanese diamond and jewelry markets were stagnant, savvy foreign buyers were cherry-picking larger, better-quality diamonds discreetly at very depressed Japanese prices and shipping them out of the country. They were taking advantage of the fact that Japan’s diamond markets and their prices have long been somewhat independent from the rest of the world, due to their unique diamond grading and pricing systems. Rapaport price lists were seldom used for trading among Japanese dealers.
ShiftsIn recent months, the rapidly rising prices of almost all natural resources are putting even more pressure on the jewelry and diamond markets. Trade members report in unison that this is the worst market they have ever seen, especially after Rapaport raised its price list in May. Some would not even respond to RDR’s interview request, saying “You know how it is.”
But, after the May price hike, it became obvious that larger, better-quality, well-made stones were extremely strong, with their prices sometimes higher than the already-high list prices, while the weakly graded, lower-end categories sank lower, according to Masahiko Akaike of Orient 4Cs, a jewelry and gemstone wholesaler.
“On one hand, consumers are refraining from buying, especially the nonessential items such as jewelry,” said Michio Iwasaki of Iwaden Sangyo Co., Ltd., and also a director at Japan Jewellery Association (JJA). “On the other hand,” said Iwasaki, “a new mentality currently is sweeping through the trade: ‘When the consumers are not buying, let us buy from them.’” Since prices are reported on a daily basis — and they are usually rising — the public is fully aware of what is happening to the value of their diamonds and jewelry and is ready to capitalize on that value.
“It is not just jewelry or precious metals. People are selling everything from name-brand apparel to handbags and scarves that they had acquired,” said Iwasaki. “Japan has become a huge second-hand market.”
Successfully BuyingNet Japan Co., Ltd. is probably the country’s most successful buyer of precious metals and diamonds from the public. According to the company’s website, it operates nine buying offices throughout the country and expects its annual sales to exceed $1.2 billion in 2009. “I have heard the turnover has already reached $1.1 billion this year,” said Iwasaki. “There’s no company like Net Japan in the jewelry trade.”
The company was incorporated 12 years ago, right after the country’s economic bubble burst. At the time, most major Japanese jewelers were still buying diamonds from overseas manufacturers and “buying from the public domestically was somewhat controversial,” remembered Kazunari Sasaki of Net Japan. “We were against the trend.”
The company started as a precious metals dealer, focusing mainly on gold and platinum. The acquired gold and platinum was then refined into bars and ingots and sold to other precious metals traders or exported out of the country. Japanese consumers had accumulated hoards of precious metals over the years, especially throughout the bubble economy days that began around 1980 and peaked in 1992. In 1983, Japan lifted its duty on loose diamonds and the Japanese began buying up enormous amounts of diamonds.
Were they aware that prices would go up so much? “Not to this level, but we are often praised for our insight,” replied Sasaki.
Net Japan is a metals dealer first and foremost, although it does accept pieces containing diamonds if consumers want to cash them in. “Today, our trading is not limited to anything particular. We take diamonds as they come, from melees to large sizes,” said Sasaki.
Net Japan is a regular exhibitor at the Hong Kong jewelry shows, at which it sells diamonds to local buyers. At the recent Hong Kong show in March, the company reportedly sold $2.8 million worth of diamonds. “Local buyers were swarming at the booth,” observed Iwasaki. “They knew diamonds from Japan were cheap.”
There are other Japanese companies selling diamonds in the overseas markets and, although Net Japan is capable of exploring new international markets, at the moment, it is not within their focus, said Sasaki.
The Marketplace• After Rapaport raised prices on its list in May, the prices of 2-carat+ diamonds in VS-and-better qualities and high colors became very strong.
• The domestic market is unable to catch up with new prices.
• Darker-color stones, such as I-K, have also become strong.
• The lower end of SI2 qualities in 0.30, 0.50 and 0.70 carats is weak across the board, while SI1 remain strong.
• 0.20 to 0.25 carat in bridal items are strong.
• Fancy pinks of round brilliants are moving very well, and it is suspected they are being exported overseas.
• Well-made heart shapes are moving well. Radiants are slow.
Article from the Rapaport Magazine - August 2008. To subscribe click here.