Japan’s extensive investments in U.S. Treasurys may serve as leverage in tariff discussions with the Trump administration, noted Finance Minister Katsunobu Kato on Friday. During a segment on TV Tokyo, Kato remarked, “It does exist as a card, but I think whether we choose to use it or not would be a separate decision.”
Although Kato did not delve into the specifics, he refrained from signaling Japan’s intention to ramp up sales of its U.S. government bonds amid talks prompted by President Donald Trump’s tariffs affecting Japanese exports. Previously, Kato and other Japanese officials firmly set aside the option of utilizing their Treasurys as a negotiation tool.
As of late February, Japan holds the position as the largest foreign holder of U.S. government debt, amounting to $1.13 trillion. Trailing behind is China, which similarly clashes with Trump’s administration over trade issues and is second in foreign investment in Treasurys.
Kato underscored that a variety of elements would figure into negotiations with Trump, hinting that ensuring they do not offload Treasurys might appease Washington enough to foster a beneficial agreement for Japan. President Trump’s aggressive approach has rattled longstanding U.S. trade policies, even with pivotal allies such as Japan, by instituting hefty tariffs on a broad array of imports.
A Japanese delegation engaged in tariff talks visited Washington this week to further discussions. Imminently, the U.S. plans to enact a 25% tariff on imported automobiles and parts, along with a general 10% baseline tariff. These measures pose economic challenges for Japan, already experiencing a slowdown in growth.
The stability of Asian Treasurys holdings, including Japan’s interests, has been relatively constant in recent years. Nonetheless, analysts raise concerns that China or other nations could decide to liquidate their U.S. Treasury investments as trade conflicts deepen. Traditionally perceived as a reliable financial asset, U.S. government bonds have seen recent yield volatilities, fueling fears that they might be losing that dependable status due to Trump’s tariff strategies.