Japan overtakes China as the biggest creditor to the US, as Japan’s June Treasuries holdings jump to a 30-month high

Japan surpassed China in June as the top holder of US Treasuries as the trade war between the world’s two largest economies intensified.

Japan increased its holdings of US bonds, bills and notes by US$21.9 billion to US$1.12 trillion, the highest level in more than two and half years, according to data released by the Treasury Department on Thursday. Meanwhile, China’s ownership rose for the first time in four months to US$1.11 trillion, up by US$2.3 billion.

The last time Japan held the position as America’s largest foreign creditor was May 2017. The nation has added more than US$100 billion worth of Treasuries at a fairly steady pace since October 2018. Treasuries have become more attractive as the globe’s pool of negative yielding debt grows, according to BMO Capital Markets.

While benchmark 10-year US yields have plunged to the lowest level since 2016 in recent months, the rate on 10-year Japanese government bonds is currently negative 0.23 per cent.

“The buying we have seen from Japanese investors is really a reflection of the globally low and negative yield environment,” said BMO strategist Ben Jeffery.