Why does Japan hold so many US Treasuries?

Discussion in 'Economics' started by harkm, Dec 10, 2009.

  1. harkm


    I don't think I understand this. Doesn't Japan have the highest Debt to GDP of the largest economies? Do they hold all these treasuries to suppress the Yen? Are these foreign reserves subtracted from their Debt to calculate the Debt to GDP? I never hear anybody discuss this. Any help is appreciated.
  2. This doesn't answer your question directly, but its a good clear overview of the problems Japan is facing...

    Another good source is Richard Koo's book-


    It describes the idea of a balance sheet recession... which most people in the US policy dept begrudgingly acknowledge as a reference to what could be or is happening in the US at the present moment...

    Larry Summers is quoted on the cover and Paul Krugman also acknowledges the theory's importance for the US as well. Whether they will actually alter policy to consider this idea of a balance sheet recession remains to be seen...

    In short, Japan may not be in a situation to push their yields up at all, so they use US Treasuries for any yield they can get.

  3. When a country drops an atomic bomb on you, for the rest of your existence, you buy whatever they are selling.
  4. Funny. But hopefully not meant as a serious thought. Japan competed ruthlessly with autos, and in the end won. That's not the sign of a victim with Stockholm Syndrome.
  5. harkm


    On a basic level, why don't they use their reserves to pay down debt? Won't they be hurt badly if interest rates spike?
  6. Illum


    They need to export
  7. after crying on your thought, it's so painfull. It clearly illustrate the danger of the old mentality of a slick Tomato... In the case of the Orange you can build in Levels... And so space become infinite... and furthermore you can digg the ground as deep as you want and always find something of interest... furthermore we went to the moon...

    So please, open your eyes too...
  8. harkm


    Very interesting, thanks.
  9. Central bank currency intervention was and is one of Japan' s main tools to "manipulate" their currency. US Treasury holdings gives them some "fire power"...
  10. They hold foreign assets, because, similar to China, they used to run a large trade surplus.

    They do have a very high debt/GDP, but it's all financed by domestic savings, not by foreign investors. One thing that's been highlighted recently is that household savings ratio in Japan has been falling sharply, which is not good news for the govt and its ability to roll its funding. However, the corporate savings rate has been rising to more than make up for the dwindling household demand for JGBs.

    Obviously, the Japanese govt still has major issues...
    #10     Dec 11, 2009