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China sets new record investment in Japan bonds
AFP - 1 hour 22 minutes ago
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China sets new record investment in Japan bonds
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TOKYO (AFP) - – China has more than doubled its record investment in Japanese government bonds this year, buying a net 541 billion yen in the first four months alone, an official said Tuesday.
China had previously invested modestly in Japanese government debt, selling a net 80 billion yen of Japanese securities last year.
But this year, net buying in the January-April period stood at 541 billion yen (6.22 billion dollars) -- more than double the 253.8 billion yen total for all of 2005, the current full-year record, a finance ministry official said.
The increase coincides with Europe's fiscal crisis and may indicate that China is putting more of its ballooning foreign exchange reserves into relatively stable Japan government bonds (JGBs) as a result, say analysts.
China has sought to diversify its vast investments away from the US dollar since the onset of the financial crisis.
Japan's risk of default is perceived to be much lower than debt-hit Greece or other eurozone countries, even though its gross public debt is nearing 200 percent of GDP, the highest among developed countries.
With around 95 percent held by domestic investors, Japanese bonds are seen as relatively safe bet. As of the end of March, foreign investors owned 4.6 percent, or 31 trillion yen of outstanding JGBs.
However, the finance ministry official said: "True, domestic investors are a source of stability in JGB prices. But most of those investors are Japanese banks, and if banks face troubles, the JGB market would not remain calm."
The ministry official added that most of the Chinese investment is for short term bonds, with 517.7 billion yen consisting of debt maturing in less than a year and 23.4 billion yen of medium to long-term securities.
China's foreign exchange reserves have ballooned in recent years, fuelled by strong foreign investment, large trade surpluses and inflows of "hot money" -- short-term speculative funds in search of quick profits.
The reserve, already the world's largest, grew 25.25 percent to a record 2.447 trillion dollars at the end of March from 1.9537 trillion dollars a year earlier, the People's Bank of China said in April.
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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