China increases yen holdings for first time in 3 months

China purchased US$3.1 billion worth of Japanese bonds in October, the first time in three months it has increased its yen-denominated assets as the yen began to outperform the dollar and the euro, Bloomberg reported. Japan’s Ministry of Finance reported that China bought US$2.77 billion of short-term Japanese debt and US$366.55 million of long-term bonds in October. Analysts believe the move is intended to take advantage of the yen’s appreciation against the dollar and the euro, not returns from debt. The yen has been the biggest gainer against the dollar and the euro this year. The Bank of Japan has created a US$59.7 billion fund to buy back domestic debt. Japanese benchmark 10-year yields sank to a seven-year low of 0.82% in October after Japan’s central bank cut its key interest rate to near zero.