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Written by Boris Schlossberg Senior Strategist

USD/JPY fell further in relatively light Asian session trading on the back of comments by a senior Chinese parliamentary official that China should gradually reduce its holdings of USD denominated debt.  A report in Wen Wei Po a Beijing backed Honk Kong newspaper made those comments public at the start of Asian trade which caused selling in USD/JPY to accelerate as traders  speculated that China may  curb its future purchases of US Treasuries. The nation has been accumulating foreign reserves at a rate of $50 Billion per quarter and has become the second largest holders of US assets in the world. Later in the day however PBOC distanced itself from the statement by Cheng Siwei by noting that his words expressed his own academic view rather than a material change in the Central Bank’s FX management policy. As a result the USD/JPY stabilized at 117.60 but was still down on the session from the 117.80 close in New York on Monday.

 

Japanese real estate stocks extended gains into the eighth straight day on Tuesday morning, making up for mild profit-taking in some other sectors in the wake of Monday’s sharp rise. By midday the Nikkei was up 0.3 percent to 17,384.53. The Topix also rose 0.3 percent to 1,760.21. Real estate climbed another 0.7 percent, gaining from last week’s positive national land price survey. Tokyo Land was up 1.6 percent to Y1,085. Tokyo Tatemono leapt 5.7 percent to Y1,384 after Daiwa Research Institute said it had upgraded the stock to its top rating. Daiwa said office rents in Tokyo had room to grow strongly. Metals stocks responded favorably to price rises in copper, gold and other commodities. Sumitomo Metal Mining climbed 2.1 percent to Y1,673. Mitsubishi Materials jumped 2.9 percent to Y647. Securities stocks rose 0.9 percent, benefiting from signs of high retail interest in share buying as Japan’s fiscal year began. Nomura, Japan’s biggest securities house, rose 1.9 percent to Y2,690. Daiwa Securities, its largest rival, gained 1.5 percent to Y1,642. Overall, the market remained in a conservative mood, as it digested Monday’s temporary rise in the Topix to a 14-year high. Cautious investors responded by boosting the electric and gas sector, a classic defensive play. Kansai Electric Power rose 1 percent to Y2,650.

 

Japanese Government Bonds were weighed down by a messy 10 year auction today with yields rising to 1.1865% before easing to 1.1850% compared to yesterday’s close of 1.1845%. Japan’s Finance Minister Tanigaki noted that rapid rise in long term interest rates would harm the economy and stated that the Ministry was watching the situation closely.