Amid rising geopolitical tensions, China has reduced its holdings of U.S. Treasury securities to the lowest level in nearly 18 years as of June. Japan's holdings have also significantly decreased.
According to data from the U.S. Treasury Department released on the 17th, China's U.S. Treasury holdings fell to $633.4 billion in June, down 4% from $659.3 billion in May. This marks a decline of over 13% compared to the same period last year. The June figure is the lowest since September 2008, when holdings were at $618.2 billion. China remains the third-largest holder of U.S. Treasuries, after Japan and the United Kingdom.
The South China Morning Post interpreted this reduction as a response to increasing geopolitical uncertainties, including renewed tensions between the U.S. and Iran, and growing doubts about U.S. policy direction. Rising long-term Treasury yields due to fiscal concerns and an unclear path for future Federal Reserve interest rate decisions have diminished the attractiveness of U.S. Treasuries.
In fact, total foreign holdings of U.S. Treasuries also decreased to $9.299 trillion in June, down from $9.371 trillion in May. However, this figure is still 2.3% higher than the same month last year.
Japan, the largest holder of U.S. Treasuries, saw its holdings drop to $1.116 trillion in June, a 2.3% decrease from $1.143 trillion in May. The United Kingdom, the second-largest holder, also reduced its holdings to $939.9 billion in June, down 1% from $948.6 billion in May.
The decline in Japan's holdings is believed to be related to recent interventions in the foreign exchange market to defend the yen. Analysts suggest that Japan may have sold U.S. Treasuries to acquire dollars for yen purchases.
Concerns have been raised that if Japan sells U.S. Treasuries on a large scale to defend the yen, it could lead to a drop in Treasury prices and an increase in interest rates, raising borrowing costs for the U.S. government. In response, the U.S. joined Japan in yen defense efforts at the end of July, reportedly selling euros to purchase yen during this joint intervention.
* This article has been translated by AI.
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