Rapaport Magazine

Japan Market Report

Colored Diamonds Strong

By Kazuko Ito
RAPAPORT... When the white stones’ prices have gone up so much, consumers have to turn to something else,” said Hidetaka Kato, chairman of Kashikey Co., Ltd. “This is the reason colored diamonds are picking up recently.” Kato says colored diamonds provide more versatility in fashion statements than white diamonds and they are less expensive. Kashikey started its Brown Diamond line six years ago, when such stones were least valued by the trade and dealers were least interested in adding them to their inventory, and the line has been a sales sensation. Seeing Kashikey’s success, some trade members followed suit in moving into brown, but most second-tier merchandisers of brown diamonds have pulled back by now. Kashikey’s Brown Diamonds have earned widespread recognition in the market, said Kato, and the company keeps the line fresh by infusing new design ideas into the products each year.

Prices Skyrocket
Pink diamonds continue to be very strong and their prices are skyrocketing. “As the prices have gone up so much at the wholesale level, I wonder if consumers are really buying them,” said Masahiko Akaike of Orient 4Cs Co., Ltd., a jewelry and stone wholesaler. “Are the prices reflecting real demand?” Kato concurred with Akaike: “Not only diamonds, but any natural resources, including gold and platinum, are subjects of world speculation. The problem is we cannot figure out which part of the price is from real demand and which part is from speculation. But consumers are smart. If they feel that prices have gone up too high, they will step away from buying. Instead, they will sell their old jewelry back to jewelers.”

“It does not matter any more if it’s white or pink [diamonds], as both categories appear to be traveling the same road. Today, even big traders do not want to stock them at these high prices, regardless of whether they are financially well off. As demands arise at the traders, we consign them. It is as if we are acting as the safe for them,” said Akaike. “It is simply my speculation but big houses do not want to spend money on inventory. They would rather allocate their resources to retailing, as retailing is more profitable than wholesaling.”

Tracking Yellows
“Yellows of good intense color are also in good demand,” said Michio Iwasaki, president of Iwaden Sangyo Co., Ltd. and also a director of the Japan Jewelry Association (JJA). “But the yellow stones are our headaches,” said Kato, “as it is difficult to discern synthetics or color-altered stones from real ones by sight, and Japanese consumers treasure genuineness over man-made stones. I wonder how the American trade is dealing with this problem.”

“In the Japanese trade, there are no synthetics or color-altered stones officially imported or traded. We have a system in the trade,” said Iwasaki. From time to time, a JJA member dealer submits known synthetics or treated diamonds to laboratories to test their ability to identify them. The operation is covert. No names of stone dealers nor lab names are disclosed, but meetings are called by the Association of Gemological Laboratories (AGL), which most major labs belong to, to discuss the findings of the tests.

As an anecdote, Iwasaki referred to an exhibitor at the India International Jewellery Show (IIJS) that was held in Goa in March. Although the Japanese delegate’s purpose at the show was to find Indian partners to sell Japanese products in India, the mission was unsuccessful. Instead, the Japanese delegate was approached by an Indian manufacturer who makes jewelry with man-made diamonds. “The cultured diamonds, as their brochure indicated, exhibited beautiful intense yellow hues,” said Iwasaki, “but such pieces have no official outlets in Japan.”

Argyle Connection
The pink diamonds that come into the country are mostly from the Argyle mine of Australia. Some Japanese dealers travel to Australia to buy directly from Argyle’s dealers. For larger and better stones, Argyle offers tenders several times a year and stones travel around the world for viewing. And for pinks in smaller-than-melee sizes, Argyle appoints seven dealers worldwide, of whom four are Japanese. Kashikey participates in both tenders and dealership. “In both cases, the prices have gone up tremendously,” said Kato. The reason that the Japanese represent more than half of Argyle’s melee outlets, Kato explained, is because there is still good demand for such stones in Japan.

“Japanese consumers are tough and smart,” said Kato. “The dozens of international name brands that have opened stores in the prime shopping quarters in Tokyo in the past decade have their reasons— these stores are pilot stores and the companies are testing their products in Japan. They feel if they can sell their products to Japanese consumers, they can sell them anywhere in the world.”

The Marketplace
• With a strong yen and a weaker dollar, foreign buying has subsided, making
   it easier for Japanese buyers to buy. The dealer market appears to be
• The market for high-color, well-made 4/4 is strong but it is difficult to sell 
   outside these parameters.
• Pointers, which have been lagging in the market, have become very strong 
  due to high rough prices.
• The prices of capes are stable, helped by the stronger yen.
• Smalls, such as melees and stars, are very strong and Indian manufacturers 
  are suspected of no longer working in that size.

Article from the Rapaport Magazine - April 2008. To subscribe click here.

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