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Japan's Finance Minister Yoshihiko Noda said Thursday the government was closely monitoring China's ramped-up buying of Japanese government debt and would check with Beijing on its motives.

"We are paying close attention" to recent increases in Chinese purchases of Japanese government bonds (JGBs), Noda said during a session of the upper house financial affairs committee, Dow Jones Newswires reported.

"I don't know the true intention" of China regarding its growing appetite for JGBs.

However Tokyo plans to "closely cooperate (with Beijing) and examine its intention," he added.

China bought 583.1 billion yen (6.9 billion dollars) worth of Japanese bonds in July, Japan's finance ministry said Wednesday, as the Asian giant continued to ramp up purchases of Japanese debt.

The figure was higher than the 456.7 billion yen worth of securities purchased in June.

The news came after the yen hit a fresh 15-year high against the dollar Wednesday. Currency traders say China's buying of yen-denominated assets, while too small on its own to sharply push up the yen, could be bolstering the currency indirectly.

For the first half of the year, China bought 1.73 trillion yen worth of debt, nearly seven times the full-year record of 253.8 billion yen set in 2005.

In May alone Chinese investors bought a net 735.2 billion yen in Japanese government bonds.

China has sought to diversify its vast investments away from the dollar and Europe since the onset of the financial crisis.

Most of the bonds bought by China are thought to be used by the government to manage its foreign reserves.

The increase coincides with renewed doubts about the recovery in the United States and Europe and indicates China is putting more of its ballooning foreign exchange reserves into relatively stable Japanese bonds as a result, say analysts.

With around 95 percent held by domestic investors, Japan's risk of default is perceived to be much lower than other debt-hit countries, even though its public debt is nearing 200 percent of gross domestic product, the highest among developed countries.

China's foreign exchange reserves have ballooned in recent years, surging to a record 2.454 trillion dollars at the end of June.

The reserves, already the world's largest, grew 15.1 percent from a year ago, the People's Bank of China said on its website.

One way Beijing has diversified its investments is through sovereign wealth fund China Investment Corp, which manages around 300 billion dollars and has been investing heavily in resources companies.

AFP