Japan Considers Treasuries as Trade Negotiation Leverage

Japanese Finance Minister Katsunobu Kato has publicly stated that Japan's holdings of over $1 trillion in U.S. Treasuries could potentially serve as leverage in trade negotiations with the United States. While Kato reiterated the primary use of these assets is to provide liquidity for yen intervention, he acknowledged that all options, including their use as a bargaining chip, are being considered. This marks a shift in tone amid heightened trade tensions, with the Trump administration imposing or threatening significant tariffs, particularly on automobiles, a crucial Japanese export. Japan is the largest foreign holder of U.S. government debt, followed by China, making any potential action highly consequential for global markets. Analysts suggest that simply bringing up this possibility bolsters Japan's negotiating position, even without immediate action. Recent market volatility following U.S. tariff announcements has further influenced the dynamics of the ongoing trade talks.