Savers have been carrying their gold home in carrier bags
The government is planning to reduce protection on bank deposits, jeopardising savers' ability to get their money back if a bank collapses.
Some smaller Japanese banks and life insurers have gone bankrupt recently, shaking confidence in the system.
It is also unclear when the country will emerge from recession - economics Minister Heizo Takenaka has confirmed that the country remains in deflation, with prospects of zero economic growth ahead.
Mistrust
Such is the mistrust of the banks that some people are buying gold, putting it in carrier bags or paper bags and taking their investment home by car or taxi, a report in the Financial Times said.
The demand for gold has not just been confined to jewellery.
Many have visited specialist gold shops to buy gold bars, with one shop in the Otemachi district of Tokyo said to have seen sales increase sharply.
Previously gold buyers may typically have just bought one or two kilograms of gold, now people are buying ten or twenty kilograms.
Protection for savers
Under current law, if a Japanese bank goes bankrupt, the government will insure that money is returned to depositors.
From April, government banking reforms will mean that people with savings of more than ten million yen in timed deposits in the bank will not have complete protection if a bank collapses.
From next year, the law will be widened to include people with even less savings in 2003.
Heavy savers
Japanese are typically heavy savers, and their desire to save rather than spend has often been cited as a reason for the prolonged recession there.
These same savers have had their confidence further shaken by recent problems at companies such as the supermarket chain Daiei which had to be bailed-out by banks earlier this month.