China Buys Japanese Bonds at Record Pace, Data Shows

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ASusilovic

July 8 (Bloomberg) -- China bought a net 735.2 billion yen ($8.3 billion) of Japanese bonds in May, doubling purchases for this year as it heads for the biggest annual increase since at least 2005.

China’s purchases of Japanese debt have exceeded sales by 1.28 trillion yen since January, after net sales of 78.7 billion yen in 2009, according to data released today by the Ministry of Finance. This year’s purchases are nearly five times as much as for the whole of 2005, which was the biggest year for Chinese buying of Japanese bonds between 2005 and 2009, the data show.

http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=as_sOqeDZjco

Long JPY across the board...
 
The yen’s surge to its highest level of the year against the dollar has put investors on alert for possible currency intervention by the Japanese authorities this week.

If Japan acts to shield its stock markets and exporters from the rising yen, it will be the first time Tokyo has intervened in the foreign exchange markets since April 2004.

Last week, the yen rose 2.5 per cent to a high of Y86.36 against the dollar, its strongest level since December.

The dollar dropped as fears over the pace of the US economic recovery sent US Treasury yields to record lows and prompted speculation that the Federal Reserve would be forced into another round of “quantitative easing”.

Concerns over the US economy also propelled the euro up through $1.30 against the dollar for the first time in two months.

Traders said the yen’s break upwards through its December high could open the way for the currency to test the 14-year peak of Y84.80 it hit against the dollar last November.

Once the yen had scaled that peak, they said, the way was open for the currency to test the record high of Y79.70 it hit against the dollar in 1995.

Simon Derrick, head of currency strategy at BNY Mellon, said it was unlikely that the Japanese authorities would allow the situation to go that far, however.

“I think if the dollar goes below Y85 against the yen, Japan will intervene,” he said.

Mr Derrick noted that verbal intervention from officials had done little to stem the rise.

Last week, Masaaki Shirakawa, governor of the Bank of Japan, said the appreciation of the yen hurt exports, while the associated stock price falls had a negative impact on capital expenditure and consumer spending.

Mr Shirakawa said he was continuing to watch currency and stock price movements “carefully”.

in spite of those warnings, the Nikkei 225 average of leading Japanese stocks dropped 2.9 per cent as the yen surged last Friday.

“While I am sure the Japanese authorities understand that the yen’s strength is mostly related to dollar weakness, if they see the Nikkei down another 3 per cent, they will have to act,” said Mr Derrick.

“The danger is that if the Y85 level breaks in dollar/yen, then speculators will quickly target record levels around Y80.”

http://www.ft.com/cms/s/0/65b0dc9a-9295-11df-9142-00144feab49a.html

Attention : intervention alert.:cool:
 
there are many yen dominated loans were well over due, those ultra low interest rate loans will only be profitable from the side of currency gains for those who had lend out those loans at first place. yen could be strengthening until end of this year.
 
July 27 (Bloomberg) -- More of Japan’s exports are denominated in yen than any time in at least a decade, thanks to rising sales to Asia, reducing the risk that the currency’s appreciation will erode exporters’ profits.

The CHART OF THE DAY shows that 41 percent of Japan’s exports were sold in yen in the first half of 2010, the biggest proportion in data going back to 2000, a Finance Ministry report showed yesterday in Tokyo. By contrast, 48.6 percent of Japanese shipments abroad were made in dollars, a two-year low.

Over half of Japanese exports now go to Asian countries, which pay for them in yen 48.1 percent of the time, more than the proportions for the U.S. and Europe. By keeping the deals in their own currency, exporters avoid the value of their repatriated earnings being curtailed by a yen that has gained about 8 percent against the dollar in the past three months.

“The increase in the yen ratio is good news for Japan as it reduces the vulnerability to currency fluctuations,” said Azusa Kato, an economist at BNP Paribas in Tokyo. “There’s a tendency that the more exports to Asia increase, the more the yen ratio increases, and that will reduce currency risks.”

Kato said another reason why the percentage of exports traded in yen is increasing is that more Japanese companies are making the transactions using their offshore subsidiaries.

Komatsu Ltd., the world’s second-biggest construction- equipment maker, estimates it loses about 2.8 billion yen ($32 million) of annual operating profit for every 1 yen gain against the dollar. China surpassed Japan as Komatsu’s largest market last fiscal year, accounting for 19 percent of sales.
 
The yen rose to an eight-month high against the dollar and Japanese government bonds rose, pushing 10-year yields to a seven-year low, on concern the U.S. recovery has is losing momentum...

Last print 85.39.
 
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