China has became the biggest holder of Japanese bonds, the National Business Daily reported Saturday. The choice came as global investors have been dumping U.S. bonds, traditionally considered a safe haven. Japanese investors sold 2.262 trillion yen ($20.1 billion) of U.S. bonds in December, data from Japan's Ministry of Finance showed. That was their biggest net sale since May 2013, when U.S. bonds crashed on suggestions from then Federal Reserve Chairman Ben Bernanke that the Fed could taper its bond buying program. U.S. bond prices have plunged since U.S. President Donald Trump's election victory in November, forcing Japanese investors to do an about-face after massive buying of dollar-denominated debt that ranged from U.S. Treasury securities to corporate bonds. Chinese investors have been selling U.S. bonds since May 2016. According to figures released by the Treasury Department in January, China's holdings of U.S. government bonds dropped by $66 billion in November to $1.05 trillion. China has lost its position as the U.S.' biggest overseas creditor to Japan, according to media reports in December 2016. However, China has now become the biggest holder of Japanese bonds, despite their ultra-low yield level, the newspaper reported, citing data from Japan's Ministry of Finance. Chinese investors' net purchase of Japanese bonds in 2016 reached 11.2 trillion yen, the highest level since 2005, according to the report. The Japanese government has been wooing investors to buy its bonds, and despite their low and sometimes negative yields, investors can still benefit from hedging, the newspaper reported. Previously, the biggest holder of Japanese bonds by value were Luxemburg, the U.S., the UK, France, China, Singapore and Belgium.
China has become the largest holder of Japanese bonds despite their ultra-low yield level. Demand for Japanese bonds has increased in favour of declining US bonds, which have traditionally been viewed as a safe haven. Chinese investors' net purchase of Japanese bonds last year reached JPY11.2tn ($98.4bn), marking its highest level since 2005. The rise in demand is also reflected by China's growing appetite to buy more foreign assets. Similarly, China's holdings of US bonds fell by $66bn in November last year to $1.05tn.