Japan overtakes China as US’ largest foreign creditor

Japan surpassed China in June as the top holder of US Treasuries as the trade war between the world’s two largest economies intensified.

Japan increased its holdings of US bonds, bills and notes by $21.9 billion to $1.12 trillion, the highest level in more than two and a half years, according to data released by the Treasury Department on Thursday. Meanwhile, China’s ownership rose for the first time in four months to $1.11 trillion, up by $2.3 billion. The last time Japan held the position as America’s largest foreign creditor was May 2017.

A cautious months-long calm in the US-China trade war was interrupted in May when talks between the two sides broke down. In June, the US raised tariffs on $200 billion of Chinese goods to 25 per cent from 10 per cent.

While Trump and Chinese leader Xi Jinping agreed to a ceasefire in late June, that only lasted about a month before the US President announced that on September 1 hell impose a 10 per cent levy on virtually every import from China which are not yet subject to duties.

This week, Trump partially backed down by delaying the 10 per cent charge on certain items, including mobile phones and laptops, until December 15 to stem the impact on holiday shopping. Beijing says it still plans to retaliate.

China’s US debt hoard has come under increased scrutiny in the trade dispute amid speculation that the Asian nation could sell Treasuries in response. Earlier this month, the US formally labelled China a currency manipulator after the yuan weakened past 7 per dollar.

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