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The following article was published in our article directory on October 9, 2010.
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What is the Impact China to Buy Japanese Bonds

Article Category: Business Management

Author Name: Amanda xzh

Japan criticized China for large purchases of Japanese government bonds contributed to the sound appreciation of the yen has not disappeared, new data show that China is not increasing in August to sell its share this year, but almost all day to eat into the debt. China's debt trading at what is why?

Japanese government Friday announced the sale of Japanese government bonds in August of data to all parties concerned about the yen, shocked. Sell China two trillion yen of Japanese government bonds, or about USD 25 billion.

Last month, the Japanese trade data released in July after the national debt, high-profile Japanese officials criticized China for large-scale purchase of Japanese government bonds on the rapid appreciation of the yen to play a role in fueling. The news by the Sino-Japanese dispute over the Diaoyu Islands and rapidly spread throughout the world.

In the first seven months of continuous Chinese holdings of Japanese government bonds, and the number gradually increased. Purchase of 5.3 billion U.S. dollars in June, July and achieved a 70 billion dollars. The total holdings of over twenty billion U.S. dollars.

Japanese officials believe that China, the world's largest holder of foreign reserves to buy bonds on the behavior of the momentum of increasing appreciation of the yen. Some experts believe that China's practice of harboring evil intentions, intentions by pushing up the yen against the Japanese currency to exports, increasing exports from China to Japan.

In the Sept. 9, the yen-dollar exchange rate is 83.85 to 1, is the highest point since 1995.

In spite of these accusations came out in August, after the data is very unconvincing. China's gains in the yen when the most vicious days not only did not continue to eat into the debt, but to eat most of the day this year, throwing out debt.

London Capital Economics senior economist Mark Williams, said: "(from the August deal to see) there is one thing China will certainly not do that, it is to promote the appreciation of the yen. Many critics say China to promote a stronger yen. situations do not. China sell-off, the yen is still quite strong. It seems China's actions did not have any effect on the yen. "

Williams said that the Chinese buy Japanese bonds this year is a lot, but if you look at the past five years, the number of China's holdings of Japanese bonds in fact very small, the huge Japanese market since debt can not be affected.

However, many experts also agree with the reason why the Japanese government to say that because China has huge foreign exchange reserves. China this year, a sudden surge of interest on yen assets is widely regarded as one of China's foreign reserve diversification began. China's first seven months of this year on debt to buy more than five times last year.

Depreciation of U.S. dollar 2.5 trillion of Chinese foreign reserve holdings pose a great threat. Chinese authorities have been trying to reduce the proportion of U.S. dollars, increasing the proportion of other currencies.

If the yen is not the goal of China's foreign reserve diversification, then why China increased significantly this year Japanese government bond holdings, and then suddenly throw it?

Wells Fargo in New York resident, senior currency experts Calabria quebracho (Vassili Serebriakov) analysis is that China did so for short-term purposes, may be spotted the trend appreciation of the yen, while the increase efforts to purchase JGBs. Rise in the yen currency shot them all the time, from which we get a small fortune in profits.

Sere Bristol Cardiff Senanayake estimates, the first seven months, the yen-dollar exchange rate above the average of 90 to one, and shot at Bond's time, that is August, the exchange rate of about 85 to one. Spread is not small.

The exchange rate experienced experts believe that as long-term investment objectives, the yen is not a good choice. He told reporters: "The Japanese government bond yields is clearly unattractive. Take a look at the long-term prospects of the Japanese economy, most experts believe that Japan is facing serious structural challenges, such as demographic changes, economic growth has a negative effect. Japan's debt in the large proportion of GDP, certainly a concern for investors. "

Sere Bristol Cardiff Senanayake said huge foreign exchange reserves, the investment market is very limited, only like the dollar, the yen and the euro bond market that few have the capacity to absorb China's foreign reserve investments. But several markets are not ideal. Yen by Japanese economic fundamentals of the market to the detriment of long-term investment. Dollar market in the U.S. economy weakening, the Fed continued quantitative easing monetary policy and put the prospect of expansion do not look long.

The problem is not the euro market is also small. However, from the recent statement of Chinese Premier Wen Jiabao, China will expand the scale of its holdings of euro assets, to the EU countries to support.

Sere Bristol Cardiff Senanayake that China's foreign reserve diversification is easier said than done difficult. To really solve the security problems outside the reserve, the best way is to speed up the exchange rate regime reform, reducing the rate of increase in foreign reserve.

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