'US Treasury's Largest Holder' Japan, Holding Value Hits Minimum in 3 Years

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Lee Ji-eun] Due to the impact of the U.S. Federal Reserve's interest rate hikes, bond prices have plummeted, causing Japan's holdings of U.S. Treasury securities to fall to their lowest level in three years.

On the 18th (local time), Bloomberg News cited recent statistics from the U.S. Treasury Department, reporting that the value of U.S. Treasury securities held by Japan's public and private investors decreased by $34.5 billion from $1.2 trillion (approximately 1,697 trillion KRW) as of August compared to the previous month. This represents about a 10% decline compared to the peak of Japan's U.S. Treasury holdings in November last year ($1.33 trillion).

The sharp decline in Japan's U.S. Treasury holdings is attributed to the recent expectation that the U.S. Federal Reserve (Fed) will implement additional interest rate hikes, which caused bond yields to soar. When bond yields rise, prices fall. The 10-year U.S. Treasury yield, a benchmark for market interest rates, surpassed the psychological resistance level of 3.5% on September 19 and broke into the 4% range on September 29 for the first time in 12 years. The Bloomberg U.S. Treasury index has fallen 14% so far this year, marking the largest annual decline.

The depreciation of the Japanese yen is also believed to have contributed to the reduction in Japan's U.S. Treasury holdings. As major countries worldwide engage in a "reverse currency war," selling U.S. Treasuries to raise dollars in order to defend their own currencies against the strong dollar's impact, it is speculated that Japan is also participating in this trend.

However, Bloomberg reported that Japan still maintains its position as the country holding the largest amount of U.S. Treasuries. Following Japan, China holds the second-largest amount at $971.8 billion. Bloomberg also noted that, due to the recent yen depreciation, Japanese foreign exchange authorities might sell U.S. Treasuries to intervene in the market.

This content was produced with the assistance of AI translation services.