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‘Gold For Bonds’ in Japan as Bond Buyers Get Gold Coins

Japan will reward investors who buy reconstruction bonds with half an ounce of gold, an added incentive that could boost the return by nearly six times according to Japanese Finance Minister Jun Azumi.

Individual investors who purchase more than 10 million yen ($129,000) in the debt with a 0.05 percent return and keep it for three years will receive a gold commemorative coin weighing 15.6 grams (0.55 ounces), the Finance Ministry said in Tokyo today, worth about $948 based on current prices for the precious metal.

The offer suggests the return could be boosted to 89,000 yen should gold prices remain at current levels, more than the approximate 15,000 yen one would receive from the bond.

The coupon on conventional three-year retail government debt to be sold on Jan. 16 is 0.18 percent. 10 year debt remains near multi record lows of 1%.

It looks like a desperate attempt to bolster demand for their debt which is understandable given the poor state of Japan’s finances and the recent IMF warning that Japan’s debt could “quickly become unsustainable”.

This is a sign that the Japanese government like governments internationally is very concerned that they will not be able to sell their government debt.

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