Japan's U.S. debt holdings: Japan warns of “nuclear choice” in trade talks threaten to use its massive $11 trillion U.S. debt holdings as a weapon of tension with Donald Trump

Japan has shown that it is willing to take advantage of the fact that it is the largest foreign creditor in the United States by putting its $1.1 trillion worth of goods held by the U.S. Treasury Department, according to a report that it is the largest foreign creditor in the United States.“We obviously need to put all the cards on the table in negotiations. This could be such a card,” said Japanese Finance Minister Katsunobu Kato, who also mentioned, “However, whether we actually use the card is a different question,” citing Fortune citations.

A $1.1 trillion pressure point

According to the report, Japan's U.S. sovereign debt holdings are huge, accounting for about a quarter of its GDP. Despite keeping inventory in the forex market to stabilize the intervention of the yen, officials now show that it can also be used as leverage in Washington to prevent extreme demand, Fortune reported.
If Japan dumps even a small portion of its Treasury bills, it will cause a ripple effect, and U.S. borrowing costs will soar, with all interest rates from home loans to auto loans likely to increase, which could increase. “All securities (including stocks) are in fiscal bonds because their interest rates guarantee the risk-free returns that every investor can expect,” Wealth wrote.

A double-edged sword

The consequences of Japan's sale of its U.S. bonds will also have an impact on Tokyo, with the yen rising against the dollar. But, according to wealth, the threat is more of a dependence on the U.S. economy on foreign investment to drive its consumer-based economy.

According to the report, most investors believe that Japan's threat is more of a psychological stress than a practical plan. “It's a smart move to show a card in the mind of the Us Bond Market after recent weeks,” said Martin Whetton's head of financial market strategy at Westpac, citing Fortune.

FAQ

How does Japan use its U.S. debt holdings affect the U.S. economy?
If Japan sells a large portion of its U.S. Treasury bills, it could raise borrowing costs in the U.S. according to wealth.
Can Japan really sell its Treasury bills?
Although technically possible, doing so will have a serious impact on the Japanese and U.S. economies, making it more of a negotiation strategy.