Japan gives China's yuan $10 billion stamp of approval
By Stanley White
TOKYO (Reuters) - 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.
Other countries are investing in China through state agencies, but Japan's investment is by far the biggest in the yuan. As a currency with limited convertibility, such bets are symbolic of the shift in global power towards China as the world's fastest-growing major economy.
Despite sometimes rancorous political ties between the two neighbors, Japan's economic fortunes are increasingly tied to China's economic growth and consumer demand.
China is already Japan's biggest trade partner and the two countries hold the world's biggest piles of foreign exchange reserves -- $3.2 trillion in China and $1.3 trillion in Japan.
"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.
Japan's finance minister, Jun Azumi, said on Tuesday that Japan had received permission from China to buy 65 billion yuan in Chinese government debt. He said Tokyo needed to carry out some administrative steps in coming months before purchases could begin.
"We feel this is an appropriate amount when considering our mutual goal of strengthening economic cooperation between Japan and China," Azumi told reporters.
AN INTERNATIONAL CURRENCY? Continued...