Japan in Limbo
By Catherine Pawasarat · Japan Correspondent

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When the treated orange-pink sapphires from Chanthaburi began flooding the market in late 2001, perhaps no country was hit harder than Japan.

It was Japan that got the bulk of the padparadscha-colored material, though no one knows the quantity with any certainty. One major importer put the number of imported stones at between 50,000 and 100,000.

"Probably tens of thousands of carats were imported, certified, and put on the Japanese market," says Yoshiko Doi, president of Japan's Gemological Institute of America (GIA). The value may have been anywhere between hundreds of millions of yen and a billion yen (US$8.5 million), estimates Yutaka Fukasawa, editor of Japan Precious magazine.

The Japanese loved this bright orange color — until they realized it came from diffusion. Photo courtesy Thaigem.com.

Much of the material has been returned to importers, though there's little way of knowing how much of it is still out on the market. But everyone agrees that the trade in these treated sapphires has come to practically a standstill.

Clients are not only wary of padparadschas. "The fact is, some department stores and leading retail shops refuse to display [any type of] fancy-colored sapphires. This affects our market," says the president of a major corundum import company.

The Association of Gemological Labs Japan (AGLJ) — with 28 members, the largest group of gem labs in the country — stopped issuing certification for questionable padparadschas last April, according to Junko Shida, president of the Gemological Association of All Japan (GAAJ), an AGLJ member and the largest colored stone lab in the country.

"People didn't know whether to certify it as enhancement or treatment. Sales in the stone pretty much stopped after that," she says. "Now my lab is re-certifying some as being treated."

The question is not just about padparadscha-colored gems. "Other colors are problematic, too. In Japan, we realized that it was difficult to rely on a lot of our previous rulings, for sapphires as well as other stones," reveals Shida. "The AGLJ decided to change our rulings, to be as close as possible to those of the AGTA [American Gem Trade Association] and GIA."

Together with the Japan Jewelry Association (JJA), AGLJ members hope to release the new rulings — and again start certifying questionable padparadschas — by the second half of 2003.

"Maybe a smaller lab would certify it for you, but they wouldn't mention 'padparadscha.' They'd just say 'natural sapphire, treated' or something like that," remarks Masao Yuki, president of importer F.L. Enterprise and former director of the International Colored Gemstone Association. Since none of the bulk-diffused stones can get certified easily at the moment, most dealers are waiting for the smoke to clear before trying to move their merchandise.

The JJA has announced that this stone should be categorized under the treated category, as has Shida's GAAJ, according to one reputable manufacturer. As a result, he says, high-end retailers and department stores — which traditionally deal in gems that are enhanced by JJA standards, but not the ones that are treated — have made it clear that they will not be handling stones that have undergone the new treatment.

Interestingly, Japanese consumers have had virtually no response to the padparadscha controversy, perhaps because they are ignorant of the situation. "But the bulk diffusion stones are pretty, so there are people who will buy them, even if they're treated. The problem is just disclosure," according to the GIA's Doi.

Japanese dealers feel confident that they'll be able to move the stones quickly once the certification question has been cleared up. "If properly disclosed and priced, I'm sure there would be a demand," says the manufacturer. "If sold in the form of accessory, I don't think it requires certification." With young women one of Japan's primary sources of disposable income nowadays, even accessory-priced padparadscha-colored gems are a potential cash cow.

"These are not bad stones," echoes Yuki. "We need to differentiate more between the quality of treatment, because some treated stones are better than others." He and others point to blue topaz as an example of the potential market niche for these treated padparadscha-colored sapphires.

Though most of Yuki's sales in heated sapphires have stopped because of the controversy, his business in unenhanced sapphires has improved. For another source, sapphires that aren't of a padparadscha color are still moving, at a slightly lesser pace than before. "All this has created some concerns about the other colors of sapphires, including blue ones. But people feel more confident now that time has passed. There are lingering concerns about other fancy colors, particularly yellows, oranges, and pinks. But as long as these were treated by traditional methods, it's not at all difficult to get them certified."

Last year, it was difficult to move any kind of sapphire, particularly the fancy-colored ones, the manufacturer states. "It was hard to move anything, not just sapphires. Business is so bad; but this is about the economy, not just the jewelry trade. Of course, the padparadscha thing influenced this, but we don't know how much."

As if the situation weren't pressing enough, 2003 is Japan's Year of the Sapphire. Since blue sapphire merchandise is still moving, dealers are trying their best to promote those gems. Japan's Year of the Ruby in 2002 saw big promotional events, including major industry buying trips to Thailand, but it seems unlikely that the Year of the Sapphire will see such success.

"Some customers refuse to buy them, some department stores refuse to display them, and labs refuse to check them," sighs the major corundum importer. "Under these circumstances, how can we promote sapphires?"