China increased its holdings of Japanese government bonds in the first eight months of the year, tripling the amount from the same period last year, according to Japanese media reports on Sunday.
The increase came as China was cutting holdings of U.S. debt, a move to divert more of its foreign exchange reserves into the rising yen.
In the January-August period, China purchased Japanese government bonds worth close to 9 trillion yen ($86.8 billion), up three times from the same period in 2015, the Nikkei Asian Review reported on Sunday.
While increasing its holdings of Japanese government bonds, China, the largest foreign holder of U.S. government debt, was cutting its holdings of U.S. government securities. In August, China held about $1.19 trillion in U.S. bonds, notes and bills, dropping by $33.7 billion from the prior month, the biggest drop in nearly four years, according to data released by the U.S. Treasury Department on Tuesday.
The Nikkei Asian Review attributed the surge in China's holdings of Japanese government debts and the drop in its U.S. holdings to recent appreciation of the yen and a potential fall in U.S. Treasury prices if the Fed further raises interest rates.
The yen gained more than 19 percent against the U.S. dollar during the January-July period this year, trading near 100 yen per dollar in July, CNNMoney reported in July.
If the U.S. Federal Reserve raises rates, the value of U.S. Treasury securities could drop, prompting investors to cut their holdings, the Nikkei Asian Review report said.
