Tokyo’s US Debt Weapon: Use at Your Own Risk

Japan holds over $1 trillion USD in United States Treasury debt. Or in other words, the US owes Japan a trillion dollars, borrowed to fund America’s profligate spending.

Last week, Japan’s finance minister, Katsunobu Kato, suggested Tokyo might use its treasury holdings — and the threat to unload them — as a card against Washington. This would be part of upcoming talks over the Donald Trump administration’s tariffs recently imposed on Japan and most other countries.

One understands Japan’s frustration over being “tariffed.” Japan has been a good ally. And US officials routinely describe the US-Japan relationship as rock-solid and the nation’s most important.

So it’s got to sting to be treated like the People’s Republic of China (PRC), a country that aims to destroy America, and has killed well over half a million Americans with fentanyl over the last decade plus.

But Japan ought to be careful about issuing threats, even veiled ones, about its US debt, much less acting on them. This is not a US vs Japan winner-takes-all situation. And Tokyo is loath to recognize that it needs the US more than America needs Japan, both militarily and financially.

Take away American support, and Japan would find itself under unbearable pressure from the PRC.

The Chain Reaction No One Wants

Foreigners potentially wielding America’s debt as a weapon is a well-known danger, though nobody much wants to think about it.

The usual scenario is China (which holds around $800 billion in US debt) dumping its T-bills on the market to hurt the Americans. But few people envisaged Japan initiating a chain reaction that leaves the US fiscally and morally incapable of responding to a Chinese attack on Taiwan, the Philippines, and/or Japan itself.

Read more HERE.