Japan to Pass China as America’s Biggest Creditor

Americans are routinely told not to worry about how much of our titanic national debt is held by foreigners, but those who do keep track of such things may be relieved to know that our current number-one creditor, our totalitarian geopolitical adversary China, has been surpassed by our considerably less hostile ally Japan.  Each of those nations holds a little over 10 percent of America’s debt.

While some analysts speak of Japan’s ascension to top creditor as something that will happen soon, the Wall Street Journal says it has already occurred: at the beginning of March, Japan owned $1.2244 trillion of U.S. government securities, while China had $1.2237 trillion. Measured on the scale of irresponsible government spending, 0.0007 trillion dollars is a photo-finish.

The WSJ advises that China may have sizable holdings tucked away with middlemen, making it difficult to calculate exactly how much of our debt they’re holding; if these sums were added into their total, they might still hold the top-creditor crown for a while longer.

According to Bloomberg Businessweek, this is happening because China has been cutting its investment in U.S. government securities for the past five months, while Japan bought another $7.7 billion. China is dealing with an economic slowdown and has a reduced appetite for buying strong dollars to keep the yuan down. Japan’s economy has also been rough, but their plan for escaping from the doldrums involves buying those big dollars while Japanese interest rates are kept incredibly low. Japan’s immense government pension fund has been especially eager to find higher yields than what Japanese bonds are offering at the moment.

“The Japanese purchases have helped drive long-term U.S. bond yields near record lows despite an economic expansion that averaged 2.7% annually over 2013-14,” the Wall Street Journal reports. “Those low yields have, in turn, helped keep down interest rates for Americans on everything from home loans to credit cards.” Also, fears of what might happen to the U.S. bond market as China scales back have been alleviated by the Japanese shopping spree.

Thanks, Japan! Also, it has been very helpful for so much of the rest of the world to have even bigger economic problems than America does, for so long. The Europeans are buying a good deal of U.S. debt, too, as even German bonds lose their luster. Has anyone got a plan for what to do if the rest of the world turns things around before that ever-elusive booming recovery comes surging in for us?