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Japan tops China as largest holder of U.S. Treasury debt

17 December 2016 No Comment

Japan surpassed China in October as the largest foreign owner of U.S. Treasury securities, the first time the countries have swapped places in nearly two years. Total foreign holdings fell for a fourth month.

The Treasury Department says that total foreign holdings dropped 1.9 percent to $6.04 trillion in October. Foreign holdings of Treasury debt are down 3.9 percent from a recent peak of $6.28 billion set in March.

Both Japan and China cut their portfolios in October. But China’s reduction was a larger 3.6 percent to $1.12 trillion. Japan trimmed its holdings by a smaller 0.4 percent, which meant its holdings of $1.13 trillion exceeded China’s total.

It marked the first time that Japan has been No. 1 since early 2015. China has held the top spot for a number of years. The last time it was displaced was for one month in February 2015 when Japan, normally No. 2, moved into the top spot.

In October, Ireland was in the third spot in terms of total holdings with $271 billion in Treasury debt followed by the Cayman Islands, a Caribbean banking center, with $262 billion in Treasury debt.

Total federal government debt now stands at $19.8 trillion and is projected by the Congressional Budget Office to increase by $8.6 trillion over the next decade, underscoring America’s need to keep attracting foreign investors.

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