Japan, China May Pull Back From US Debt — SkimNews
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- Ray Dalio warned this week that Tokyo and Beijing might stop financing America's imbalances, telling Bloomberg that a debtor-creditor relationship combined with an 'adversary relationship' creates 'a very difficult dynamic.'
- Asian central banks hold roughly $2.5 trillion in US Treasuries, with Japan ($1.1 trillion) and China ($618 billion, down from a 2013 peak of $1.32 trillion) accounting for $1.7 trillion combined.
- US national debt has topped $40 trillion, and total US debt across government, mortgage and corporate sectors now sits at approximately $84 trillion, according to Bill Gross, who told FT readers on September 30 to 'not own bonds.'
- Scott Bessent pressured the Bank of Japan to accelerate rate hikes, putting him at odds with Prime Minister Sanae Takaichi and finance minister Satsuki Katayama, who called Bessent's claim of 'asymmetric information' about Japan's yen plans 'scary.'
- Trump demanded a $550 billion 'signing bonus' from Japan for a lower tariff rate, then hosted Xi Jinping on the tarmac in September — the first such US presidential gesture since 1962 — raising fears in Tokyo of a grand-bargain trade deal that excludes Japan.
- US Treasury yields climbed to 24-year highs at 5.28% despite Bessent's Treasury buyback plan to 'bend the curve' on federal borrowing, with the yen failing to surge and oil prices falling — markets calling Bessent's bluff.
- China, Brazil, Switzerland and Norway's sovereign wealth funds have all been pruning their dollar holdings, while the US has lost all three of its AAA ratings since 2011 — S&P in 2011, Fitch in 2023 and Moody's in 2025.
Why it matters: Bessent's late-July yen intervention saw the US sell euros rather than dollars to fund yen purchases — an unusual concession aimed at dissuading Tokyo from selling Treasuries. With US debt at $40 trillion, yields at 24-year highs and Japan plus China holding $1.7 trillion combined, a creditor pullback would hit Washington at its worst financing moment with no obvious replacement buyers.
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