China no longer biggest US debt holder, Japan is
Japan now officially holds more US debt than China, which has been America’s major creditor since 2008. In February Japan held $1.224 trillion in US government bonds compared to China’s $1.223 trillion.
Both countries reduced their US debt investment, with China reducing its by $15.4 billion, and Japan by $14.2 billion, data from the Treasury Departments monthly report on bond holdings, published on Wednesday, shows.
In the last year, Japan has boosted its US Treasury debt by $13.6 billion, while China has decreased holdings by $49.2 billion.
China displaced Japan as the biggest holder of US debt in August 2008, but has been gradually cutting down on its US debt since July 2014.
Economic growth in China, which is at a 25-year low, is the most obvious explanation for the scale back. With more capital leaving mainland China, the less the government needs US dollars to keep the yuan in check.
The opposite is true in Japan, where the weak yen under the Bank of Japan’s monetary stimulus continues to push up the demand for dollar-held assets. HSBC Holdings forecast Japanese investors may buy up $300 billion in US Treasuries in the next two or three years.
After Japan and China, Caribbean banking centers hold the third largest amount of US debt, at $350 billion in February, pushing Belgium back to fourth place with $354 billion.
In total, foreign holdings dropped 0.9 percent to $6.16 trillion in February.
Russia, the 20th largest holder of US debt, sold off $69.6 billion in bonds, the sixth consecutive month of scaling back. In 2014, Russian investment in US securities decreased by a third, or $52.6 billion.
Investors consider US debt as a safer investment compared to Europe, where near-zero interest rates and quantitative easing threaten to stamp out bond yields. Most economists forecast the US will tighten its monetary policy by hiking interest rates sometime this year.
The Treasury Department will report on data from March 2015 on May 15, 2015.