China bought the most Japanese long-term bonds and notes since at least 2005 in March, sparking speculation that the country may be diversifying its foreign exchange reserves into the yen.
The latest figures from Japan’s finance ministry show net inflows from mainland China into Japanese bonds with maturities of over a year reached Y234.5bn ($2.9bn) in March. It marks the sixth straight month of net purchases, though the previous months’ buying was much smaller.
Analysts said it would make sense for China to be buying Japanese debt as part of its foreign exchange reserves, given its reluctance to hold all of its foreign-currency reserves in US dollars, and that it could be looking to shift away from the euro at a time when the fundamentals in some of the eurozone’s debt markets are under strain.