Japan to Overtake China as U.S. Biggest Foreign Creditor

by Nate Wooley | October 16, 2012 1:52 pm

It seems that everyone has been worried about the amount of U.S. debt held by China, America’s top foreign creditor. Pretty soon, that concern might be somewhat misplaced.

At the current pace of bond buying, Japan will become the No. 1 foreign holder of U.S. Treasury bonds, reports Bloomberg[1]. The switch takes place in January.

Treasury Department information shows that while China is currently the leading holder of U.S. debt at $1.15 trillion, Japan is close behind at $1.12 trillion. But China has slowed the rate at which it’s purchasing debt this year to 0.1% through August, while Japan has accelerated its purchases to about 6% over the same period. That will leave Japan holding the top spot in the next few months.

It’s unknown what affect China’s slowing its purchase of Treasuries will have on the sometimes strained relationship between the two countries. While accusations that China is using its relatively cheap currency to increase the competitiveness of its exports are frequent, the Treasury Department has not named it as a currency manipulator in any official capacity.

It’s doubtful that Japan will face similar accusations when it becomes the top foreign holder of U.S. debt.

More from the Far East:

Endnotes:
  1. reports Bloomberg: http://www.bloomberg.com/news/2012-10-15/romney-can-invoke-japan-overtaking-china-as-u-s-lender.html
  2. Japan’s Carmakers Are Losing Big in China: http://investorplace.com/2012/10/japans-carmakers-are-losing-big-in-china/?cc=msnfeed
  3. What Does China’s Threat of a ‘Bond Attack’ on Japan Mean for the U.S.?: http://investorplace.com/2012/09/china-japan-bond-attack-senkaku-islands-us-bonds/
  4. Trouble in China for U.S. LNG Exports?: http://investorplace.com/2012/10/trouble-in-china-for-u-s-lng-exports/

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