China Buys Nearly USD100 Billion of Japanese Bonds to Become World's Largest Holder of Japanese Debt
Yicai Global
/SOURCE : Yicai
China Buys Nearly USD100 Billion of Japanese Bonds to Become World's Largest Holder of Japanese Debt

(Yicai Global) Feb. 13 -- Chinese investors made net purchases of Japanese bonds worth JPY11.2 trillion (USD99.8 billion) in 2016, making China the world's biggest holder of Japanese bonds, the latest data from Japan's central bank and finance ministry shows.

This comes at a time when China's holdings of US Treasuries have declined for six consecutive months. Last month, Japan overtook China as the largest foreign holder of US government debt.

Japanese bonds have become more attractive since Bank of Japan's new negative interest rate policy announced on Jan. 29, 2016. Chinese investors have also increased their purchases of Japanese bonds.

The data shows that China has been boosting its holdings of Japanese bonds, particularly short-term Treasury bills maturing in less than one year. Most of the Chinese investment in Japanese bonds is believed to be made by China's central bank since Beijing implements tight restrictions over investment in foreign debt.

China's foreign exchange reserves stood at USD2,998 billion last month, down USD12.3 billion compared with the end of 2016, the latest figures from China's central bank show. The decline in forex reserves was mainly due to the central bank supplying foreign currency to the market to achieve supply and demand balance, China's State Administration of Foreign Exchange (SAFE) said. The withdrawal and diversified utilization of foreign reserves also affected the size of China's forex reserves.

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