China sells $24.5b of Japan debt in August

Japan’s Ministry of Finance announced Friday that China has sold a record US$24.5 billion of Japanese debt in August, Bloomberg reported. The sell-off comes after seven consecutive months of net purchases, including record debt purchases in May and July. China’s diversification into Japanese has debt led to friction as some Japanese politicians and commentators accused China of pushing up the value of the yen, thereby hampering an export-led recovery. In September, the Japanese government intervened in currency markets for the first time since 2004 to drive down the value of the yen. Last month, Japan’s Finance Minister Yoshihiko Noda said that it was inappropriate for China to purchase Japanese debt when Japan could not purchase China’s debt. Some 95% of Japan’s debt is held domestically, allowing the country to hold a disproportionately large amount of external debt without incurring an interest penalty on its bonds.