For Daisuke Taniguchi, the Iraqi dinar is like a lottery ticket. At least that’s the way he advertises his sales of the currency.

“We sell a 25,000 dinar bill, which was worth ¥4.09 million at the currency’s peak before the Gulf War (in 1990), for ¥7,400, and if the exchange rate recovers to the prewar level, the bill will be worth ¥4.08 million,” blares an ad run by Taniguchi’s exchange company, Rise International Inc.

After the currency gamble grabbed the attention of magazines, Rise International saw its sales rise to ¥40 million in April, compared with ¥500,000 last July when Taniguchi opened its Web site.

Customers are buying into Iraq for several reasons, including the expectation of economic recovery, a desire to help the economy and the dream of a more than 500-fold capital gain. With a short list of competitors in the dinar exchange market, Rise International and other exchange houses running a similar business are thriving.

“When I heard about the dinar, I thought I would buy it for the same reason I buy lottery tickets,” said Katsunori Arai, 50, who bought seven 25,000 dinar bills from Rise International. “People are suffering there, so I am hoping the Iraqi economy will recover.”

It is unclear if the advertising blurb is a violation of the law against unjustifiable markups and misleading representations that give the impression that products are of higher quality than they actually are.

Hiroshi Kasahara, manager of the consumer trade section of the Fair Trade Commission, declined comment on an individual case, but said that in general, “It would be problematic to say the value of a certain product will surely rise even though the value actually fluctuates by nature.”

The number of consumer complaints is one of the factors by which the FTC judges the seriousness of individual cases. The FTC selectively takes legal action against suspected serious violators, Kasahara said. Taniguchi of Rise International said he has received no complaints so far.

The business itself is legal. After the Foreign Exchange Law was revised in 1998, exchange houses were no longer required to obtain a license from the finance minister to sell foreign currencies.

It is difficult to find banks or exchange houses that handle the dinar. Taniguchi said the best chance is to change money at banks in the Middle East or through him.

The company, which donates some of its proceeds to a medical nonprofit organization in Iraq, sells 25,000 dinar bills, the highest denomination, for between ¥7,400 and ¥8,800, depending on the number of bills bought at once. That is about four times the actual exchange rate of about ¥2,100.

Taniguchi, who basically runs his company by himself, said he guarantees to exchange customers’ dinar back to yen for the same price he will pay to a broker in Saudi Arabia or other Middle East countries, which means customers lose unless the dinar appreciates against yen at least 4-to-1 from the current level.

Arai understood the high premium he paid for the dinar. Still, he may buy more if the Iraqi economy shows signs of further recovery, he said.

Customers can return the dinar to Taniguchi and get a 100 percent refund within a week of purchase. Other than those who took the refunds, nobody has asked to exchange dinar for yen, he said.

Another online exchange house, Round Table Co., sells a 25,000 dinar bill for between ¥4,640 and ¥5,800, but it does not accept dinar in exchange for yen, company spokesman Yohei Ishizuka said.

Financial planner Ryuji Shieida of FPK Training Center, however, would not recommend that his clients buy the dinar.

“The currency is a minor one, the political situation there is unstable, and we don’t get much information about Iraq. Above all, buying for quadruple the trading rate is too much,” Shieida said. “If you buy it, it should be with money you won’t regret losing.”

Motohiro Ono of the Middle East Research Institute of Japan said the political, economic and security situation in Iraq is clearly better than right before the U.S.-led invasion in 2003, and thus the current dinar level is very low.

However, the stability is based largely on the security situation, and it may become unstable again as the U.S. withdraws its forces, who, because they are neutral, are probably better at suppressing tribal conflicts than local soldiers hired by the Iraqi government, he said.

If conflicts break out, the locals may join their tribes instead of fulfilling their governmental duties of suppressing conflicts, he said.

On the macroeconomic front, Iraq has been keeping prices of goods stable, compared with the figures in the 1990s.

The inflation rate in Iraq fluctuated between minus 8 percent and 8 percent from January 2007 to this March, and the dinar has been gradually strengthening against the dollar, from about 1,300 dinar per dollar to about 1,170 dinar in the same period, according to the Central Bank of Iraq.

The dinar was worth $3.20 before the U.N. embargo that followed Iraq’s 1990 invasion of Kuwait, according to GlobalSecurity.org, a Web site compiling information on defense. Inflation mushroomed and the currency plummeted further on massive printing of counterfeit currency, driving the dinar down to anywhere between 3,500 and 4,000 against the dollar by mid-April 2003.

To improve the situation, the U.S.-led transition government Coalition Provisional Authority issued new dinar bills with watermarks and other technology making it difficult to counterfeit in October 2003.

Expectations of the dinar’s appreciation against the dollar prompted Americans to start similar businesses, which inspired Taniguchi to start his.

Taniguchi gets dinar delivered from currency brokers who fly in from Saudi Arabia and other Middle Eastern countries with backpacks full of unwrinkled dinar bills worth about ¥10 million to ¥15 million, he said.

The brokers visit Japan every other week, he said. Taniguchi pays the brokers in dollars, he added.

He attributed his success to “honestly explaining risks.”

Rise International will exchange bills if the Iraqi government issues new bills, he said. If his company goes bankrupt, clients can change the dinar to dollars and other currencies in the Middle East, he said.

What he is most cautious of is to make sure bills he sells are genuine. He said the current bills have watermarks and use other technology to prevent counterfeiting, and he has never seen fake dinar bills.

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