Japan’s Finance Minister Katsunobu Kato said Friday that the country’s large holdings of U.S. Treasury bonds could potentially be used as leverage in trade negotiations with the Trump administration. Speaking on TV Tokyo, Kato remarked, “It does exist as a card, but whether we choose to use it or not would be a separate decision.”
Although he didn’t provide further details, Kato did not suggest that Japan plans to sell off its U.S. government bond holdings as a negotiating tactic. In the past, both Kato and other Japanese officials have dismissed the idea of using Treasurys in this way.
Japan holds more U.S. government debt than any other foreign country, with a total of $1.13 trillion as of late February. China, which is also entangled in trade disputes with the U.S., ranks second in foreign ownership of Treasurys.
Kato indicated that multiple issues would be discussed during negotiations with Washington and suggested that Japan’s decision not to sell its U.S. bond holdings could potentially serve as a bargaining chip in reaching a deal more favorable to Tokyo.
President Donald Trump’s administration has taken a hard stance on trade, breaking from decades of established U.S. policy. This includes placing significant tariffs on imports from major trading partners—even long-time allies like Japan.
A group of Japanese officials visited Washington this week to discuss the tariff issue. The U.S. is expected to soon implement a 25% tariff on imported vehicles and auto parts, along with a general 10% baseline tariff. These measures come at a time when Japan’s economic growth is already under strain, adding to concerns about further economic pressure.
While Asian investment in U.S. Treasurys has stayed relatively stable in recent years, some analysts fear that ongoing trade tensions might prompt countries like China—or potentially others—to reduce or liquidate their holdings.
U.S. Treasury bonds are traditionally considered a safe investment, but recent increases in their yields have raised questions about their long-term stability, particularly as global uncertainty grows around the Trump administration’s aggressive trade policies.
