Ja­pan bumps China to hold the most US debt


Ja­pan over­took main­land China in Fe­bru­ary as the top for­eign holder of U.S. Trea­sury se­cu­ri­ties, a po­si­tion Ja­pan last held in Au­gust 2008.

In its monthly re­port on bond hold­ings, the Trea­sury Depart­ment said Wed­nes­day to­tal for­eign hold­ings of Trea­sury debt dipped 0.9 per­cent in Fe­bru­ary to US$6.16 tril­lion, down from a record of US$6.22 tril­lion in Jan­uary.

The hold­ings of the PRC, nor­mally the top holder of Trea­sury debt, slipped 1.2 per­cent to US$ 1.22 tril­lion. Ja­pan’s fell 1.1 per­cent from Jan­uary. China’s decline was a bit larger, al­low­ing Ja­pan to jump into the top spot, US$ 700 mil­lion above China.

Main­land China over­took Ja­pan for the top spot in own­er­ship of U.S. Trea­sury debt in 2008 as the fi­nan­cial cri­sis and a deep re­ces­sion pushed up U.S. gov­ern­ment bor­row­ing to fi­nance gov­ern­ment deficits. The U.S. deficit topped US$1 tril­lion an­nu­ally for four con­sec­u­tive years.

Pri­vate an­a­lysts had been fore­cast­ing that Ja­pan would sur­pass China’s hold­ings of Trea­sury debt this year given cur­rent eco­nomic trends in both na­tions.

Main­land China’s econ­omy has been slow­ing and growth of its ex­ports has been ta­per­ing, giv­ing the coun­try less to in­vest over­seas. It has also been seek­ing to di­ver­sify those in­vest­ments, leav­ing less to in­vest in U.S. gov­ern­ment bonds.

The Ja­panese cen­tral bank, mean­while, is en­gaged in an ag­gres­sive ef­fort to boost the coun­try’s money sup­ply to bol­ster the econ­omy and fight low in­fla­tion. That means there is more money to in­vest over­seas. Ja­panese in­vestors have been at­tracted to dollar hold­ings be­cause of higher rates of re­turn on dollar-de­nom­i­nated in­vest­ments.

Sung Won Sohn, an eco­nomics pro­fes­sor at the Smith School of Busi­ness at Cal­i­for­nia State Uni­ver­sity, Chan­nel Is­lands, sees those trends con­tin­u­ing, with Ja­pan’s hold­ings of Trea­sury debt grow­ing faster than China’s.

Ja­pan’s hold­ings of Trea­sury debt are US$13.6 bil­lion higher than they were a year ago, while China’s hold­ings are US$49.2 bil­lion lower than a year ago.

The main­land au­thor­i­ties is also be­ing pres­sured by the Obama ad­min­is­tra­tion to al­low its cur­rency to rise in value against the dollar.

Amer­i­can man­u­fac­tur­ers have com­plained for years that China is ma­nip­u­lat­ing its cur­rency, keep­ing it un­der­val­ued against the dollar as a way to gain trade ad­van­tages. A weaker main­land Chi­nese cur­rency com­pared to the dollar makes Amer­i­can goods more ex­pen­sive in China and Chi­nese goods cheaper for U.S. con­sumers.

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