The Economist

Colour me dazzled

Record auction prices for rare coloured diamonds

“If you have money to invest, there is no safer haven than something rare,” says Laurence Graff, the London-born “King of Diamonds”. If this is sales talk, he is his own best customer. In December 2008, during some of the bleakest days of the credit crisis, Mr Graff paid $24.3m for the 35.56-carat, 17th-century Wittelsbach blue diamond at Christie’s in London. He set the auction record for any jewel. But in his opinion, “it was the bargain of the century. In my life, it is the rarest of them all; it is the supreme coloured diamond.”

Yet Mr Graff felt it could be improved. His team began work on the Wittelsbach almost immediately. It was a daring, even daredevil, move. When he bought the historic diamond it worked out at $1.46m per carat. As a result of polishing it weighs four carats less. This could be calculated as a loss of about $6m, but not by Mr Graff. He values the Wittelsbach-Graff, as the gem is now called, at $100m. “We have given it life which it didn’t have before,” he explains. Many may soon judge for themselves. The Smithsonian Institution in Washington, DC, has been in discussions with Graff regarding the possibility of a public presentation of the diamond at the National Museum of Natural History. ...

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Is Japan back in a deflationary trap?

WHILE investors have been fretting recently about Japan’s huge debt, another of the dreaded D-words has come back to haunt them. On Friday November 20th, Japan’s Cabinet Office issued a monthly report that for the first time since 2006 acknowledged that the country was suffering from deflation.

Consumer prices have actually been falling for months, but the pace of decline accelerated over the summer. In September prices slumped by 2.2% compared with a year earlier. This is partly because the country is still loaded with excess capacity after the collapse in exports during the global financial crisis, and partly because oil prices were lower in September than in the same month last year. But there are more structural problems, too. As Japan’s population declines, for instance, retailers are being forced to cut prices to gain market share. ...