China's "overtly" yen? (Country Gold Commentary)

Japanese government bonds while ago has been sold poorly, so I thought in the promotional ads on the move, saying "investment bonds men is reliable." But now, Japan's views on the sentence ad more complex, because they suddenly realized that sometimes investment bonds "men" are not reliable.

Japan's Finance Ministry recently released figures show China in June this year, holdings of Japanese government bonds continued, and in size over 1-4 months of this year and, after the previous May. At the same time, the first half of the total holdings of Japanese government bonds break 1.7 trillion yen, a record.

Holdings of such a large scale and sustained yen, observers habitually attributed the diversification of China's foreign exchange investment strategies. But the dollar unsafe, the Japanese yen 2.45 trillion U.S. dollars foreign exchange reserves of China's new direction?

Clearly not. First of all, Japan is actually the number of the sense of "national bankruptcy." According to the International Monetary Fund (IMF), the latest data showed Japan's gross public debt accounts for 229% of its GDP, ranked first in the developed countries. In contrast, some time ago the outbreak of the Greek sovereign debt crisis, its public debt-GDP ratio of only 113%. The reason why the international rating agencies often "let off" the yen because the Japanese Jiu Cheng Yen bonds held by domestic private sector, foreign capital holdings do not exceed 4.6%.

Second, government bonds, compared with the United States, Japan, the lowest yield on government bonds. For example, the U.S. 10-year bond yields over 3% now, while the 10-year Japanese government bonds yield only about 1.1%, while the Japanese bond market, the liquidity of the secondary to be much less.

Therefore, risk considerations, whether or preservation needs, the yen is not a strategic transformation of China's foreign exchange direction. Total 1.7 trillion yen of government bonds, according to current exchange rate calculation less than 200 billion dollars, compared to 800 billion U.S. dollars of U.S. treasury bond investment, can not compare, at most only a symbol.

But such high-profile intervention yen, the plan for that? The recent sharp appreciation of the yen may disclose certain information. Data show that the yen this year in May embarked on a continuous appreciation of the way, two months against the U.S. dollar from 95 points down to recent lows near 85, advancing to the highest point in 15 years, has appreciated more than 10% of the total significantly more than the euro, sterling and other major non-US currencies, which indicates that the last two months from the large Chinese holdings of yen bonds gained a lot of money the action proceeds.

But only for revenue purposes? In fact, a lot of buying in Japan on the Chinese mentality of debt is also very subtle. On the one hand there is the Japanese bond stress, the economic downturn, the problem of population aging, Japan's national debt to absorb the space is limited, so buy the Chinese this time to ease pressure on the Japanese capital. On the other hand, Japan also remain vigilant. The voice of the mainstream in Japan that the Government should not over-encourage overseas investors to buy Japanese government bonds, because once a large number of Japanese government bonds held by foreign investors suddenly selling Japanese government bonds, will affect the stability of the Japanese economy.

In addition to financial security concerns, there are trade costs on the "fuss." China and Japan are typical export-oriented economy, as foreign exchange reserves, a large number of configuration yen assets, will boost the yen strengthened to some extent undermine the competitiveness of Japanese goods. More subtly, taking into account Japan's trade surplus in China's power status, and China's traditional export strengths in Japan - mechanical and electrical products, strong growth, not difficult to understand Japan's concerns.