Japanese Finance Minister Katsunobu Kato firmly dismissed the idea of using Japan’s holdings of U.S. Treasury bonds as leverage against U.S. President Donald Trump’s decision to impose tariffs on Japanese imports. Speaking before parliament on Wednesday, Kato emphasized that Japan’s approach to managing its U.S. Treasury holdings is solely focused on future needs for currency intervention, not on bilateral negotiations.
“We manage our U.S. Treasury holdings with the intention of preparing for potential exchange-rate intervention, not as a tool for diplomatic bargaining,” Kato explained.
His comments came in response to a proposal from a ruling party lawmaker suggesting that Japan consider selling its U.S. Treasury holdings as a countermeasure against U.S. tariffs. Kato rejected the idea, asserting that Japan’s foreign reserves, which include these U.S. Treasury holdings, are not excessively large and that there is no established benchmark for the ideal size of these reserves.
Furthermore, Kato warned that selling foreign assets would lead to a surge in yen-buying activity, effectively conducting currency intervention, which should be approached with caution. “Regardless of the scale of such operations, we must proceed with care,” he added.
Japan’s foreign reserves are estimated to total around $1.27 trillion, with a significant portion of these reserves believed to be in the form of U.S. Treasury bonds, although the exact composition remains undisclosed by the government.
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