ZeroHedge believes that the Japanese have been buying more treasuries because the rates on JGB are so low. These rates have been low forever, and the Japanese have not seem to mind so I believe that there is a different cause for this sudden buying.
I would like to see what holdings Japan has been reducing in order to buy treasuries. It could be there own bonds, but they have not had any funding issues. My guess is that the money that was formerly invested in the Eurozone is being placed into treasuries.
Switching to treasuries accomplishes two goals. First, it preserves capital by getting it out of Europe. Second, buying dollars to buy treasuries helps keep the dollar strong and the Japanese export machine happy.
Isn’t fun watching all of the machinations of these central banks? One makes a move, then another makes a countermove. When does this lead to a full-blown currency war?