Japan Overtakes China as the Top Foreign Holder of U.S. Treasury Debt
WASHINGTON, D.C. - Surprise, China is no longer the largest foreign holder of U.S. Treasuries.
Japan now owns more U.S. government debt above all other countries, beating China’s six year record, according to data released by the Treasury Department. The news comes as Japan’s central bank embarks on an aggressive effort to combat deflation and boost the country’s money supply, ultimately resulting in more money to invest overseas.
On Wednesday, the Treasury Department revealed that Japan owned $1.2244 trillion worth of U.S. government securities versus China’s $1.2237 trillion as of February. It should be noted, however, that transactions carried out by other nations on behalf of China and Japan aren’t included, CNN reports.
In recent years, the Obama administration has pressured China to allow the yuan to rise in value against the dollar.
“Economic growth and export growth are slowing in China and as a result China has less money to invest overseas, while Japan’s central bank is pursuing policies that will keep the Japanese yen weaker against the dollar and thus make dollar investments more attractive to Japanese investors,” said Sung Won Sohn, an economics professor at the Smith School of Business at California State University, Channel Islands, according to the Associated Press.
Japan’s U.S. debt holdings are $13.6 billion higher over the past year, while China’s holdings are $49.2 billion higher.
“The dynamic between Japan and China has shifted, in part due to foreign-exchange-reserve needs and the currency dynamics between the two countries,” said Edward Acton, a U.S. government-bond strategist at RBS Securities Inc. in Stamford, Connecticut, a primary dealer, according to Bloomberg. “It’s a global-macro investing signpost.”
Given this data from the Treasury Department and current economic trends in Japan and China, foreign buying is expected to continue to suppress long-term rates in the U.S., said Russ Koesterich, BlackRock’s Global Chief Investment Strategist, according to MarketWatch.
In comparison, the Federal Reserve is another major buyer of U.S. Debt. CNN reports that the central bank owned nearly $2.5 trillion worth of Treasuries, up from $800 billion at the end of 2007.
