Japan Selling US Treasuries Amid Global Economic Shift

Japan is selling US treasuries at a time when the global economic landscape is shifting. This trend is a significant departure from the past, where Japan was a major buyer of US debt.

The country's decision to sell US treasuries is largely driven by its desire to reduce its exposure to US dollar-denominated assets. This move is a response to the rising yen and the need to boost its economy.

Japan's treasury holdings in US securities have been steadily declining since 2013, with a notable drop in 2020. This trend is expected to continue as Japan seeks to diversify its investments and reduce its reliance on US debt.

The shift in Japan's investment strategy is also influenced by its growing trade surplus and the need to manage its foreign exchange reserves.

Japan's banks are selling their U.S. Treasury holdings, with the country's fifth-largest bank, Norinchukin, selling $63 billion in Treasurys.

This is a significant move, as it shows that even foreign investors are losing confidence in the U.S. government's ability to repay its debts.

The even larger Japan Post Bank has more than $550 billion in U.S. bonds, which could also soon head to the auction block.

This massive liquidation of Treasury holdings is a sign that the U.S. government's debt crisis is starting to affect foreign investors.

The dollar has lost one-fifth of its value in just 3½ years, wiping out trillions of dollars of bondholders' wealth around the world.

This kind of backdoor default is why some Japanese banks are selling their Treasury holdings, rather than holding onto them and risking further losses.

A fresh viewpoint: Major Foreign Holders of Us Treasury Securities

China has been aggressively buying up US Treasuries, increasing its holdings by 11% in 2020 alone. This has allowed China to accumulate a significant amount of leverage over the US economy.

In 2020, China's holdings of US Treasuries reached a record high of $1.07 trillion. This is a stark contrast to the 2008 financial crisis, when China's holdings dropped by 14% in just one year.

The US government has been relying heavily on foreign investors, including China, to finance its growing budget deficits.

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