Zaheer_Malik
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Japan Just Pulled Out Its Biggest Weapon – $1.13 Trillion in US Treasuries
Japan has finally taken the gloves off. In a rare move, Finance Minister Katsunobu Kato went live on national television and waved a weapon the US knows all too well — Japan’s $1.13 trillion in US Treasury bonds.
When asked whether Japan would ever use its position as America’s biggest foreign creditor as leverage in trade talks with President Trump’s administration, Kato didn’t hesitate.
“It does exist as a card,” he said calmly — a sentence that hit like a lightning bolt through the markets.
This wasn’t a slip of the tongue. Japan has always avoided even mentioning the idea of dumping US debt. But with Trump throwing around "reciprocal tariffs" since April, Japan is now clearly keeping all its options on the table.
That first tariff announcement had already rattled US markets. Yields spiked, bonds were sold off, and panic started spreading. Trump eventually hit pause for 90 days — but the damage had been done.
Japan’s economic warning: Don’t push us too far
Kato’s comment came just hours after Japan’s top trade negotiator, Ryosei Akazawa, returned from tense meetings in Washington with Treasury Secretary Scott Bessent and other US officials. Behind closed doors, they reportedly clashed over US car imports, energy, and agricultural exports — all areas where Trump wants Japan to give ground fast.
Japan might agree to buy more US natural gas or farm products — but not without a fight. Kato, who also met Bessent in late April, has clearly had enough.
Analysts didn’t mince words. Nicholas Smith, Chief Strategist at CLSA, said:
“This is a street fight now. If you’ve got a powerful weapon, not showing it would be naive. You don’t have to use it — just letting them know you could is enough.”
And this isn’t just about Japan. If China — which also holds a mountain of US debt — follows suit with a similar threat, America’s bond market could spiral. Together, Japan and China hold immense leverage. And now that Japan has made the first move, it could trigger a much bigger global reaction.
Japan’s Prime Minister already called Trump’s trade war a “national crisis.” For Kato, someone known for being cautious and diplomatic, to speak so bluntly in public shows how serious things have gotten.
Jesper Koll from Monex Group put it best:
“When Japan’s finance minister openly talks about its US Treasury holdings, it’s not just a warning. It’s a message: We’re done playing nice.”
Talks between Japan and the Trump administration will intensify in May, with a possible deal by June. But one thing’s clear — Japan isn’t just asking for fairness anymore.
They’re saying: Push us again, and we torch the bond market.
When asked whether Japan would ever use its position as America’s biggest foreign creditor as leverage in trade talks with President Trump’s administration, Kato didn’t hesitate.
“It does exist as a card,” he said calmly — a sentence that hit like a lightning bolt through the markets.
This wasn’t a slip of the tongue. Japan has always avoided even mentioning the idea of dumping US debt. But with Trump throwing around "reciprocal tariffs" since April, Japan is now clearly keeping all its options on the table.
That first tariff announcement had already rattled US markets. Yields spiked, bonds were sold off, and panic started spreading. Trump eventually hit pause for 90 days — but the damage had been done.
Japan’s economic warning: Don’t push us too far
Kato’s comment came just hours after Japan’s top trade negotiator, Ryosei Akazawa, returned from tense meetings in Washington with Treasury Secretary Scott Bessent and other US officials. Behind closed doors, they reportedly clashed over US car imports, energy, and agricultural exports — all areas where Trump wants Japan to give ground fast.
Japan might agree to buy more US natural gas or farm products — but not without a fight. Kato, who also met Bessent in late April, has clearly had enough.
Analysts didn’t mince words. Nicholas Smith, Chief Strategist at CLSA, said:
“This is a street fight now. If you’ve got a powerful weapon, not showing it would be naive. You don’t have to use it — just letting them know you could is enough.”
And this isn’t just about Japan. If China — which also holds a mountain of US debt — follows suit with a similar threat, America’s bond market could spiral. Together, Japan and China hold immense leverage. And now that Japan has made the first move, it could trigger a much bigger global reaction.
Japan’s Prime Minister already called Trump’s trade war a “national crisis.” For Kato, someone known for being cautious and diplomatic, to speak so bluntly in public shows how serious things have gotten.
Jesper Koll from Monex Group put it best:
“When Japan’s finance minister openly talks about its US Treasury holdings, it’s not just a warning. It’s a message: We’re done playing nice.”
Talks between Japan and the Trump administration will intensify in May, with a possible deal by June. But one thing’s clear — Japan isn’t just asking for fairness anymore.
They’re saying: Push us again, and we torch the bond market.
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