In a recent statement, Japan’s Finance Minister, Katsunobu Kato, suggested that Japan’s substantial holdings of U.S. Treasury bonds could serve as a “card on the table” in ongoing tariff negotiations with the Trump administration. Kato’s comments, made during a national TV interview, hinted at the potential use of Japan’s U.S. Treasury holdings as a strategic asset in the trade talks, though he made it clear that the decision to utilize such a card remains up for discussion.
As the largest foreign holder of U.S. government debt, Japan holds approximately $1.13 trillion in U.S. Treasurys as of February 2025, a position that gives it considerable leverage in negotiations with the United States. However, Kato did not confirm any intention to sell off these holdings, an option that had previously been dismissed by Japanese officials.
The U.S. and Japan are currently embroiled in heated trade disputes, especially under President Donald Trump’s administration, which has implemented substantial tariffs on various products, including automotive exports from Japan. These tariffs are set to increase, with a 25% tariff on imported vehicles and auto parts scheduled to be imposed soon, further straining Japan’s economic growth.
China, the second-largest foreign holder of U.S. Treasury bonds, is also facing escalating tensions with the Trump administration over trade and tariffs. Analysts have expressed concerns that as trade tensions worsen, countries like China and Japan might consider liquidating their U.S. Treasury holdings, which could destabilize the global financial system.
Despite these concerns, U.S. Treasurys are traditionally viewed as a safe financial asset. However, rising bond yields and the effects of Trump’s tariff policies are causing some to question the stability of this once-seen secure investment.
Japan’s Finance Minister emphasized that a wide range of factors would be considered in the talks with Trump, signaling that Japan’s promise not to sell off U.S. Treasurys could be part of a larger negotiation strategy to reach an agreement that benefits Japan amidst growing tariff threats.
The situation remains fluid, and the ongoing trade discussions between the U.S. and Japan will likely play a significant role in shaping the global economic landscape.
