Japan threatens to offload its $1 trillion US Treasury holdings if Trump trade talks don’t go well Japan just pulled out the sharpest blade it’s got in the drawer — $1.13 trillion in US Treasury bonds. That’s what Finance Minister Katsunobu Kato waved in America’s face on Friday, right on national television. Asked if Japan would ever use its role as the world’s biggest foreign holder of US government debt as a weapon in trade talks with President Donald Trump’s administration, Kato didn’t blink. He said, “It does exist as a card,” and tossed that line like a lit match. “Whether or not we use that card is a different decision.” This wasn’t some offhand comment either. Japan has always avoided even talking about dumping Treasuries. But now, with Trump throwing around “reciprocal” tariffs like candy since April 2, Tokyo’s keeping its options open. That tariff stunt already sent US markets into a tailspin. Treasury yields spiked, bonds got dumped, and traders panicked. After the chaos, Trump paused the tariffs for 90 days, but of course, the damage was already done. Japan uses bond threat to push back on Trump’s tariff war Kato’s words landed hours after Ryosei Akazawa, Japan’s top trade negotiator, wrapped up another tense meeting in Washington. He sat down with Scott Bessent, Trump’s Treasury Secretary, and other White House officials. No details were made public, but diplomatic sources say they talked about US car imports, energy, and agriculture deals. The trade surplus with the US is a long-time sore spot, and Trump wants it cut—fast. The Japanese side might consider buying more American gas and farm goods. But that’s not happening without a fight. Kato, who met Bessent personally in the last week of April, is one of the key guys in this whole thing. And he’s clearly had enough. Analysts are calling it what it is: a warning shot. Nicholas Smith, chief Japan strategist at CLSA, said, “This is a street fight. Promising not to use one of your strongest, most brutal weapons would be both naive and reckless. You don’t need to use the weapon—just brandish it.” And that’s exactly what Kato did. It’s not just about Japan either. If China, which also holds a mountain of Treasuries, jumps in with a similar threat, the US bond market is screwed. Between Japan’s stash and China’s, the leverage is real. With Japan leading the charge now, they’ve opened the door to something much bigger. The prime minister of Japan has already called Trump’s trade war a “national crisis.” Kato taking this public shows just how fed up he and his top guys are. Jesper Koll, director at Monex Group, called the move shocking, especially from someone as careful as Kato. “The fact that the usually extremely guarded and diplomatic finance minister spoke up on national TV about what is arguably Japan’s biggest asset in dealing with America confirms the growing confidence of Japan’s elite in their dealings with the US,” Koll said. Negotiations between Akazawa and the Trump team are expected to ramp up through May, with a possible deal on the table by June. But Japan’s now fighting back with sharp elbows. They’re not just asking for “fairness.” They’re saying: Touch us again, and we torch the bond market.
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Japan Signals It May Leverage $1 Trillion in U.S. Treasuries Amid Trade Dispute
Japan has issued a stark warning amid rising trade tensions, hinting it may use its massive holdings of U.S. Treasury securities—worth over $1.1 trillion—as leverage in negotiations with the United States. The statement came directly from Japanese Finance Minister Katsunobu Kato, who acknowledged the possibility of using the nation’s bond portfolio as a negotiating tool.
In a televised interview, Kato stated the option "does exist as a card," marking a rare and deliberate departure from Japan’s traditionally cautious stance on its foreign reserves. The comment was widely interpreted as a strategic signal aimed at Washington amid mounting pressure from U.S. tariff policies, particularly under the Trump administration.
This comes after U.S. tariffs triggered market volatility in early April, prompting a temporary 90-day suspension. Still, the economic aftershocks were significant—bond yields rose, selloffs accelerated, and investor confidence wavered.
Japan's move appears to be a response to increasingly aggressive U.S. trade demands, especially concerning automobiles, energy exports, and agricultural imports. While Tokyo may be open to negotiating larger purchases of American goods, officials have made it clear they won’t accept one-sided terms without pushback.
Analysts view the mention of U.S. Treasury bonds as a strategic warning rather than an immediate threat. “You don’t have to use the weapon—just showing it can change the conversation,” said one market strategist.
Given that China also holds a substantial amount of U.S. debt, any similar move from Beijing could further destabilize the bond market. Japan’s public stance may open the door to broader resistance among major U.S. creditors.
The next round of talks is expected to intensify through May, with negotiators aiming for a resolution by June. However, Tokyo’s message is now clear: it’s prepared to use every economic tool available to defend its interests.