Japan will go ahead and buy 65 billion yuan ($10.3 billion) in Chinese government debt as part of a push for closer economic ties between Asia's top economies and to take a small step to diversify its vast foreign reserves.
Japan and China agreed at a summit in December to strengthen financial cooperation and that included increased use of the yuan and yen in bilateral trade as well as Tokyo's buying of Chinese government bonds.
Japan has received Beijing's permission to buy the debt, but it has to carry out some administrative steps before purchases can begin, Finance Minister Jun Azumi said yesterday.
"we feel this is an appropriate amount when considering our mutual goal of strengthening economic cooperation between Japan and China," he told reporters. Tokyo is likely to start with a small amount and then increase purchases while also considering possible market impact when choosing the timing of the transactions, Azumi added.
China said on Monday it would continue its purchases of Japanese government debt but would reduce purchases when the yen is rising, to avoid making things more difficult for Tokyo, concerned about the negative impact of a strong yen on its exports.