It is not too hard to figure out what Japan is doing with its reserves.

From the beginning of 2003 to September 2004, Japan’s official reserves increased by $360 billion. Over that time frame, Japan’s holdings of treasuries increased by $342 billion. That number also includes private Japanese purchases of treasuries, but it still tracks the reserve data pretty closely. There is a bit of a lag between the purchase of dollar reserves and the purchase of treasury bills with those dollars, but the two go up together. There is a reason why treasury dealers say Japanese intervention leads to higher demand for short-term treasury bills.

China poses a bit more of a mystery. From beginning of 2003 til September 2004, the People’s Bank of China’s (PBoC) reserves increased by about $268 billion (including the roughly $45 billion used to recapitalize state banks). China’s recorded holdings of treasuries increased by $56 billion over this time, so only 20% of so of China’s increased reserves are showing up in higher recorded Chinese holdings of treasuries. This year reserves are up $106 billion while holdings of treasuries are up only $16.5 billion, so the fraction of Chinese reserves going into Treasuries seems to be declining over time.