China’s Purchase of Japan’s Long-Term Debt Hit Record in April

We understand why the Chinese have bought the government bonds of the U.S., Japan and Korea.

From Bloomberg:

China’s net purchases of Japan’s long-term debt reached a record as the larger nation seeks to diversify the world’s biggest currency reserves.

China bought a net 1.33 trillion yen ($16.6 billion) in Japanese long-term bonds in April, the biggest amount since records began in January 2005, according to data released today in Tokyo by Japan’s Ministry of Finance. The nation sold a net 1.47 trillion yen of short-term debt, the data shows.

“As China tries to diversify its assets with its huge foreign-exchange reserves, it probably wants to have yen- denominated assets to some extent” in the longer term, said Tetsuya Inoue, chief researcher for financial markets for Tokyo- based Nomura Research Institute Ltd. “China has a strong trading relationship with Japan.”

Japanese government debt due in 10 years and longer has handed investors a 2.2 percent gain since the start of April, versus a 1 percent advance for the broad market, based on Bank of America Merrill Lynch data. The Nikkei 225 Stock Average has fallen 2.9 percent over the same period.

http://www.bloomberg.com/news/2011-05-12/china-buys-most-japanese-bonds-since-2005.html