Japan's Finance Minister, Mr. Katsunobu Kato, recently stated that the large volume of U.S. Treasury bonds held by Japan could become one of the bargaining tools in trade discussions with Washington.
Speaking on a television program on Friday, Mr. Kato emphasized that although the primary goal of holding this large amount of assets is to ensure liquidity for intervention moves in the currency market, Tokyo "still needs to put all cards on the table" when participating in negotiations.
As of early 2025, Japan is the largest foreign creditor of the U.S. with approximately $1.17 trillion in U.S. government bonds – this figure has slightly decreased from the peak of $1.27 trillion in previous years, according to data from the U.S. Treasury. This is part of Japan's foreign exchange reserves worth about $1.27 trillion, most of which is believed to be invested in U.S. government debt instruments.
"Whether we will actually use that card is another question," Mr. Kato said, adding that he would be cautious in considering the liquidation of bonds as a real leverage. However, his remarks suggest that Tokyo does not rule out the possibility of using this asset block as a pressure factor amid the ongoing challenges in trade relations with the U.S.
Over the years, Japan has consistently recorded large trade surpluses with the U.S., which has led Washington to complain multiple times about the trade imbalance between the two economies. According to 2024 data, Japan's goods trade surplus with the U.S. is about $70 billion, largely coming from exports of cars, electronic components, and machinery. Meanwhile, Japan mainly imports agricultural products, liquefied natural gas (LNG), and aircraft from the U.S.
Washington has long imposed tariffs on Japanese goods, particularly in the automotive sector – Tokyo's key export industry. The U.S. government has repeatedly pressured Japan to open its markets and reduce exports to the U.S., arguing that this negatively affects the domestic industry.
In the context of geopolitical conditions, global trade is increasingly unstable and supply chains are changing, Japan is also making efforts to rebalance its trade and financial policy. The mention of the "card" of U.S. Treasury bonds is not only a strategic signal but also reflects the reality that the economic relationship between these two powers is highly interdependent: the U.S. needs stable buyers for its government debt, while Japan needs to maintain yen stability to support exports.
However, experts warn that if Japan actually liquidates a large volume of U.S. bonds, it could cause significant disruptions in the global financial market, increasing bond yields and putting pressure on the U.S. dollar. Therefore, the likelihood of Tokyo using this "card" in practice is very low.
Referencing Reuters