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Pimco Says Japan & America Securities Investment Attraction Lost debts
Friday, 10 June 2011 05:22

pimco_logoPimco cut ownership of Japanese corporate debt securities and U.S. government debt in the last six months due to reduced investment appeal, despite the political turmoil in Japan is unlikely to trigger a spike in the near future, said the head of Japan's bond fund portfolio.

Tomoya Masanao also said defaults on U.S. bonds will cause "significant shocks" to the global market, although he expects the Americans to finally avoid this.

Japanese Prime Minister Naoto Kan survived no-confidence motion in parliament last week by saying he would quit. But he did not specify when and political impasse has raised fears of delays in fiscal reform to control the large debt twice the size of its economy $ 5 trillion.

Large costs for the reconstruction of the earthquake and tsunami of fiscal burden, credit rating decline triggers threats by rating agencies.

Pimco has a little Japanese government bonds since December last year but from the standpoint of valuation rather than on concerns about the fiscal and political woes of Japan, said Masanao.

"The prospect of unpredictable political and difficult to interpret as the theme of the market," said Masanao. "The main driver underlying market moves is a global economic prospects than the Japanese fiscal policy," he told Reuters in an interview on Thursday.

Along with cutting the ownership of JGB, Pimco also significantly reduce the investment in the U.S. Treasury in the last six months, said Masanao.

This step is intended to take a more attractive investment opportunities, such as bonds issued by countries such as Australia, Canada, Brazil and Mexico are not faced with serious fiscal problems, he said.

Pacific Investment Management Company (Pimco) are the biggest bond fund manager in the world with assets management of nearly $ 1.3 trillion.

Masanao said global economic risks create doubt on estimates that the Japanese economy will continue a moderate recovery later this year.

Japan's economy may experience another decline on weak demand if the fiscal stimulus is too little and too late, or if expectations of a prolonged monetary easing by the U.S. Federal Reserve triggered the yen surges against the dollar, he said.

"The key is whether the BOJ's monetary policy / Bank of Japan pre-emptively," said Masanao. "Unfortunately, past behavior BOJ has been reactive, not proactive," he said. "What should be done is to aggressively buy JGBs, effectively adopting quantitative easing, to rein in rising yen."

Bank of Japan has signaled that he was ready to loosen its policy further if the damage from the quake proved bigger than expected and the decline in domestic demand. But against a massive quantitative easing and carefully increase the purchase of long-term JGBs.