The Buzz | Beijing is buying up record chunks of Japan’s debt mountain

China went on a record-buying spree of Japanese bonds over the summer months, snapping up $20.9 billion of the low-yielding debt to spur talk that it’s diversifying reserves.
The 2.2 trillion yen of purchases, made in June to August, are a record in local currency terms for a three-month period based on data from Japan’s Ministry of Finance going back to 2005. The last time Chinese buyers had gone on a similar splurge was back in 2016.
The eye-catching investments into low-yielding Japanese debt may be driven by a few factors, according to JPMorgan Chase & Co. strategists.
As global bond yields collapsed, Japanese debt may be seen as more attractive on a real-yield basis. Some of the Chinese inflows was probably due to “dollar asset swap purchases,” strategists including Sosuke Nakamura and Tohru Sasaki wrote in a note. That’s when investors lend dollars for yen, collecting a premium for the greenback which is then used to enhance returns.
However, geopolitics may also be in play, JPMorgan indicated.