China no longer biggest US debt holder, Japan is

Reuters / Yuya Shino

Reuters / Yuya Shino

Japan now officially holds more US debt than China, which had $1.224 trillion in US government bonds compared to China’s $1.223 trillion in February.

Both countries reduced their US debt investment, with China
reducing its by $15.4 billion, and Japan by $14.2 billion, data
from the Treasury Departments monthly report on bond holdings,
published on Wednesday, shows.

In the last year, Japan has boosted its US Treasury debt by $13.6
billion, while China has decreased holdings by $49.2 billion.

READ MORE: China cuts back on US debt for 5th
month in a row

China displaced Japan as the biggest holder of US debt in August
2008, but has been gradually cutting down on its US debt since
July 2014.

Economic growth in China, which is at a 25-year low, is the most obvious explanation for the
scale back. With more capital leaving mainland China, the less
the government needs US dollars to keep the yuan in check.

The opposite is true in Japan, where the weak yen under the Bank
of Japan’s monetary stimulus continues to push up the demand for
dollar-held assets. HSBC Holdings forecast Japanese investors may
buy up $300 billion in US Treasuries in the next two or three

After Japan and China, Caribbean banking centers hold the third
largest amount of US debt, at $350 billion in February, pushing
Belgium back to fourth place with $354 billion.

In total, foreign holdings dropped 0.9 percent to $6.16 trillion
in February.

Russia, the 20th largest holder of US debt, sold off $69.6
billion in bonds, the sixth consecutive month of scaling back. In
2014, Russian investment in US securities decreased by a third,
or $52.6 billion.

Investors consider US debt as a safer investment compared to
Europe, where near-zero interest rates and quantitative easing threaten to stamp out bond
yields. Most economists forecast the US will tighten its monetary
policy by hiking interest rates sometime this year.

The Treasury Department will report on data from March 2015 on
May 15, 2015.

Leave a comment