Beijing Buys Japanese Government Bonds
Beijing purchased a net 457 billion yen (US$5.3 billion) of Japanese government debt in June, extending a record acquisition of Japan's bonds seen since the start of the year, according to a report released by Japan's Finance Ministry. China has become one of Japan’s largest creditors.
According to data from the IMF, Japan’s debt amounts to 218.6% of its 2009 GDP, 113% higher than that of troubled Greece.
Japanese Finance Minister Yoshihiko Noda welcomed the purchases, though other elements in the Japanese polity harbor suspicions about Beijing’s intentions.
According to Goldman Sachs estimates, the total government debt in China is 15.7 trillion yuan ($2.31 trillion), accounting for 48 percent of the 2009 GDP, while the total debt in the U.S. accounts for 50 percent of GDP. The internationally recognized national debt level is no more than 60 percent of GDP.
Japan's national debt, already accounting for 229% of its GDP, lead to estimates that Japan’s government bonds may again be over 200% for the 2011 year GDP. Based on its 2010 total nominal GDP of 475 trillion yen ($5.5 trillion), Japan’s public debt will reach 950 trillion yen ($11 trillion), and each Japanese person will have to bear 7.5 million yen ($86,962) in debt.
Japan's Prime Minister Naoto Kan warned in his first policy speech to the Japanese Parliament that Japan could face a financial crisis similar that of Greece if it doesn’t tackle its colossal debt.
Yu Fenghui, a senior China financial analyst predicts that China is running a high risk by investing substantially in Japanese government bonds. He commented: “We need to note that the liquidity of the Japanese yen is far worse than that of the U.S. dollar and the Euro. It will be quite difficult to sell once the market is against yen; this is why only 4.6% of the Japanese debt is held by foreigners or foreign institutions.”