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China buys 6.9 billion dollars of Japan bonds
 
 
  
 
 AFP - Wednesday, September  8
 
 
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 China buys 6.9 billion dollars of Japan bonds
 
 
 
 
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TOKYO (AFP) - – China bought 6.9 billion dollars worth of Japanese bonds in July, Japan's finance ministry said Wednesday, as the Asian giant continues to ramp up purchases of Japanese debt.
 
China bought a net 583.1 billion yen of Japanese bonds in July, a finance ministry official said. The figure counts long-term government bonds as well as medium- and short term bonds issued by the public and private sectors.
 
The figure was higher than the 456.7 billion yen worth of securities purchased in June.
 
The news came after the yen marked a fresh 15-year high against the dollar Wednesday, hitting 83.33 to the dollar. Currency traders say China's buying of yen-denominated assets, while too small on its own to sharply push up the yen, could be bolstering the currency indirectly.
 
For the first half of the year, China bought 1.73 trillion yen worth of debt, nearly seven times the full-year record of 253.8 billion yen in 2005.
 
In May alone Chinese investors bought a net 735.2 billion yen in Japanese government bonds (JGBs).
 
China has sought to diversify its vast investments away from the dollar and Europe since the onset of the financial crisis.
 
Most of the bonds bought by China are thought to be used by the government to manage its foreign reserves.
 
The increase coincides with renewed doubts about the pace of recovery in the United States and Europe and indicates China is putting more of its ballooning foreign exchange reserves into relatively stable Japanese bonds as a result, say analysts.
 
With around 95 percent held by domestic investors, Japan's risk of default is perceived to be much lower than other countries, even though its public debt is nearing 200 percent of gross domestic product, the highest among developed countries.
 
However, "China appears to be using JGBs as a temporary shelter and it does not appear to be settling down for a long stay," given the predominance of the short-dated JGB buying, Shuji Tonouchi, a senior fixed income strategist at Mitsubishi UFJ Morgan Stanley, told Dow Jones Newswires.
 
Echoing that view, last week's China Securities Journal report said that China was unlikely to continue buying Japanese government debt in the coming months due to the yen's volatility.
 
China's foreign exchange reserves have ballooned in recent years, surging to a record 2.454 trillion dollars at the end of June.
 
The reserves, already the world's largest, grew 15.1 percent from a year ago, the People's Bank of China said on its website.
 
One way Beijing has diversified its investments is through sovereign wealth fund China Investment Corp, which manages around 300 billion dollars and has been investing heavily in resources companies.
 
 
 
 
   
 
 
 
 
 
 
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