皇冠体育app

Op-Ed Contributors

Japanese bonds not bad assets

By Zhang Zhouxiang (皇冠体育app Daily)
Updated: 2010-08-12 07:52

If you take a taxi ride in some Japanese cities, you may see advertisements featuring Junko Kubo, a former female anchor on Japan's public broadcaster NHK. The ads simply read: "Government bonds are worth another look."

This is not the first time Japanese government bonds have made it to ads and billboards. As early as 2005, Japan's Ministry of Finance decided to promote its bonds. But when a big buyer has finally emerged now, many Japanese media outlets and individuals don't seem to welcome it.

According to Tokyo's latest official data, 皇冠体育app purchased more than 1.73 trillion yen ($20.1 billion) worth of Japanese bonds in the first six months of this year. That's a giant leap compared to the past: almost seven times the one-year record of 253.8 billion in 2005. And it makes 皇冠体育app the second largest creditor to Japan.

But 皇冠体育app's purchase actually has little impact on 皇冠体育app, because the Japanese bonds make up a tiny proportion of Beijing's foreign exchange reserves: less than 1 percent of the total $2.45 trillion.

In the international bond market, Japanese bonds are not hot stock. Low interest rate and lack of liquidity have long made them unattractive to many buyers, including 皇冠体育app. Though no official data is available, many scholars say the combined US dollar assets comprise most of 皇冠体育app's foreign exchange reserves, while its assets in Japanese yen make up a tiny part.

Perhaps that's why this purchase has drawn the world's attention. Many Chinese economists are analyzing the gains and risks involved in buying Japanese bonds. And some Japanese doubt the real intentions of 皇冠体育app in buying their country's bonds. One Japanese netizen even wrote an article: "Will Japan be fooled by Chinese hot money?"

Yuan Changjun, a research fellow in finance with the University of International Business and Economics has analyzed the advantages and disadvantages of purchasing Japanese bonds, and suggests 皇冠体育app could increase some of its Japanese bond holdings in order to diversify its foreign exchange reserves.

Risk is always the first factor to be considered while making an investment. Many people have expressed concern over security, for Japan has the largest public debt among industrialized nations. According to the International Monetary Fund, its debt had reached 218.6 percent of its GDP last year, much higher than the 113 percent of Greece. Even Japan's new Prime Minister Naoto Kan has warned of the possibility of a financial mess, fearing it could turn Japan into another Greece.