2012-03-13

China approves $10 billion Japanese purchase of treasuries

Japan gives China's yuan $10 billion stamp of approval
Japan will buy 65 billion yuan ($10.3 billion) of Chinese government debt, the country's finance minister said on Tuesday, giving China a mark of approval in the credibility of the yuan as an international currency.
Of course, this is mostly a symbolic act:
"For China, the move is linked to its efforts to internationalize the yuan -- allowing foreign investments in its debt market will make the yuan more accepted internationally," said Zhang Yongjun, an economist at the China Centre for International Economic Exchanges, a government think tank.
China doesn't want Japan buying too many bonds, lest the yuan start appreciating and hurting Chinese exports. Japan needed approval for this reason, in the "race to the bottom" that are the Currency Wars, buying another nation's bonds is a great way to devalue.

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