China's Japanese bond holdings hit all-time high
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E-mail Shanghai Daily, June 5, 2012
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China holds short-term and long-term Japanese government bonds worth 18 trillion yen (US$230 billion). [Photo/Xinhua] |
China solidified its position as the largest creditor of Japan after increasing its holdings of Japanese government bonds by 71 percent by the end of 2011 from a year earlier.
China holds short-term and long-term Japanese government bonds worth 18 trillion yen (US$230 billion), according to the Japanese Ministry of Finance and the Bank of Japan.
Foreign institutions and individuals held a total of 92 trillion yen worth of Japanese government bonds by the end of 2011, increasing 27 percent from a year earlier, the data showed.
"The Japanese government bond is considered a relatively safe haven even though its reputation is not very good on the international market," said Tan Yaling, president of the China Forex Investment Research Institute. "China, among other countries, has made the choice for the sake of minimizing risk."
The yield of the Japanese government 10-year term bond fell to a nine-year low of 0.81 percent on May 31, indicating strong investment interest.
The information was released amid a series of measures recently implemented to enhance financial cooperation between the two largest economies in Asia.
"The growth of some emerging markets such as Japan and South Korea is quick and the assets there are of high quality," Tan said. "To increase reserves of currencies from these countries could lift the status of the Asian currencies, and would help Asian countries to hedge risks of the US dollar and the euro."
Last Friday, direct trading of Japanese yen and Chinese yuan began in Tokyo and Shanghai, which could reduce the trade cost between the currencies, and reduce reliance on the US dollar.
Earlier in May, top leaders from China, Japan and South Korea agreed to start talks about a free trade zone.
In March, the Japanese government was approved to buy as much as 65 billion yuan of Chinese government bonds, and the Japanese authorities said they would increase their holdings gradually.
China surpassed the United States and the United Kingdom in 2009 to become Japan's largest creditor.
Analysts have estimated that the Chinese yuan already is a small part of the foreign reserves in Asian and Pacific countries, including Indonesia, Singapore and Australia.
The internationalization of the yuan depends "ultimately" on the market, and the yuan has the potential to become a widely accepted currency internationally, Chinese central bank Governor Zhou Xiaochuan told China Business News in a report released yesterday.
He said China doesn't want to give the impression that it has a specific strategic plan to internationalize the yuan, but the central bank would cut unnecessary controls on the market to facilitate the opening up.
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