Chinese investors turned net sellers of Japanese government bonds in a record sale in August, the first in eight months after having steadily bought up Japanese debt this year, data showed Friday. The data may ease earlier speculation that China's aggressive buying of Japanese government bonds was part of its effort to diversify its foreign exchange reserves, concentrated in the United States and Europe.
Chinese investors sold a net 2.018 trillion yen (24.5 billion dollars) worth of Japanese securities in August, mostly short-term money market instruments, according to the finance ministry. It was the highest net amount sold by Chinese investors in a single month since the ministry started comparable data from 2005.
"This puts a question mark on whether they will indeed keep purchasing assets from other Asian countries," said Dariusz Kowalczyk, a strategist with Credit Agricole, told Dow Jones Newswires. With the US and European economies still struggling, China was seen putting more of its ballooning foreign exchange reserves into relatively stable Japanese bonds as a result, say analysts.
Currency traders had previously speculated that China's buying of yen-denominated assets, while too small on its own to sharply push up the yen, could be bolstering the currency indirectly. For the first half of the year, China bought 1.73 trillion yen worth of debt, nearly seven times the full-year record of 253.8 billion yen in 2005. It bought 583.1 billion yen of Japanese bonds in July. Japanese Finance Minister Yoshihiko Noda last month questioned China's ramped-up buying of Japanese government debt when Japan was unable to invest in China's market.