[By Guancha Observer Network, Xiong Chaoyi]
According to reports by Nikkei Asia and Reuters on April 13, Kodera Gontaro, chairman of the Policy Research Council of Japan's ruling Liberal Democratic Party, stated on the same day that during the Japan-US government talks scheduled for April 17, Japan will not consider using its held US Treasury bonds as a negotiating tool against US tariffs. "As allies, we would not deliberately use our held US public debt to cause market chaos, which is certainly not a good idea."
After US President Donald Trump proposed the so-called "reciprocal tariff" on April 2, he suddenly announced a 90-day suspension for most countries on April 9, retaining only 10% of the so-called "benchmark tariff." Some people believe that one of the reasons for this change is related to the large-scale selling off of US Treasury bonds, with Japan's actions drawing particular attention.
Reuters pointed out that last week, there was a large-scale selling off of US Treasury bonds, leading to the largest increase in long-term yields since the outbreak of the COVID-19 pandemic in 2020. The US, which should have played the role of a financial turbulence shelter, suffered significant losses. Some investors speculated that given the impact of Trump's trade policies, global foreign exchange reserve managers such as China may be re-evaluating their holdings of US Treasury bonds.
However, later, American media personnel first reported that the ally of the United States, Japan, had sold US Treasury bonds. Since then, rumors about this have become more frequent, with some market participants attributing it to a Japanese hedge fund. Japanese netizens believed that perhaps a Japanese hedge fund that had previously invested unsuccessfully panicked and sold US Treasury bonds during this round of market fluctuations, "saving the world" and forcing Trump to delay the imposition of tariffs.
Although these online rumors have yet to be confirmed, Japanese financial analysts combined with the fact that both Japanese and US Treasury bonds were sold at the same time during Tokyo trading hours suggested that the possibility of Japanese institutions selling US Treasury bonds is very high. It is precisely because of these various rumors, coupled with Japan being the largest creditor of the United States, that people are paying close attention to how the Japanese government views US Treasury bonds.
Since the beginning of this year, the trend of US Treasury bond yields Financial Times chart
Japan-US negotiations approaching, Japan's stance: US Treasury bonds should not be used for retaliation
Previously, an opposition party member suggested that the Japanese government should use its held massive US Treasury bonds as a negotiation tool in the Japan-US bilateral trade negotiations. Regarding this idea, Kodera Gontaro clearly rejected it in a program broadcast by NHK on the same day. He insisted that Japan should not intentionally sell its held US Treasury bonds to retaliate against Trump's tariff increases.
According to data from the US Treasury Department, in January this year, Japan held $1.079 trillion worth of US Treasury bonds, making it the largest holder of US Treasury bonds outside the United States; secondly, China held $760.8 billion worth of US Treasury bonds.
Kodera Gontaro attributed the acceleration of inflation to the weakness of the yen. "The weakness of the yen is one of the factors driving up prices. To reverse the decline of the yen, the key lies in enhancing the competitiveness of Japanese companies." The report suggests that his remarks may imply that Japanese policymakers believe that the continuous depreciation of the yen is the main threat facing the economy, rather than the recent temporary appreciation.
Reuters cited two sources familiar with the negotiations stating that Akira Takazawa, newly appointed to negotiate tariffs with the Trump administration, will meet with US Treasury Secretary Mnuchin on April 17 in local time.
The Japanese negotiators are seeking exemptions from the "reciprocal tariff" that took effect on April 9, while the US wants Japan to make concessions on agriculture and liquefied natural gas. As a historically close ally of the United States, Japan has been hit by a 24% "reciprocal tariff" rate, far exceeding market expectations, while its economic cornerstone, the automobile industry, faces a 25% punitive tariff.
Kodera Gontaro said that Japan should raise the issue of US tariffs within the framework of the World Trade Organization (WTO). He also emphasized the plight of neighboring countries, many of which are suffering from the highest tariffs globally, and stated that Japan will focus on strengthening cooperation with ASEAN countries.
Japanese Liberal Democratic Party Policy Research Council Chairman Kodera Gontaro Nikkei Shimbun
It was reported that the upcoming Japan-US bilateral trade negotiations this week may also touch on sensitive exchange rate policy issues, with some officials privately expecting that the US side might request Japan to intervene in the yen exchange rate. Reuters sources revealed that the pace of the Bank of Japan gradually raising interest rates from ultra-low levels may also face criticism from the US side.
Reuters pointed out that Japan has traditionally made great efforts to curb excessive yen appreciation, as a strong yen would severely damage its export-oriented economy. However, in recent years, the Bank of Japan has maintained ultra-loose monetary policy, while the Federal Reserve continued to raise interest rates, causing the yen to fall to nearly a 30-year low.
In 2022 and 2024, when the USD/JPY exchange rate approached the 160 mark, the Japanese government intervened twice to buy yen and intervene in the foreign exchange market. Recently, with the comprehensive selling off of the dollar, the yen has significantly rebounded. On April 11, the USD/JPY exchange rate fell to 142.895, reaching the lowest point since September last year.
Trump's sudden change of mind, the key issue is the "US Treasury crisis"
After the so-called "reciprocal tariff" caused nearly a week of market fluctuations, on the afternoon of April 9 local time, US President Donald Trump suddenly changed his mind and announced a 90-day suspension for most countries to implement the "reciprocal tariff," retaining 10% of the so-called "benchmark tariff" during this period.
Although US Treasury Secretary Mnuchin insisted that this was a "strategy" that the Trump administration had already decided on, CNN reported on April 9 local time, citing three informed sources, that given Mnuchin's investment background in the financial sector, he would not fail to understand market signals. The concern within the US Treasury Department over the large-scale selling off of US Treasury bonds is one of the core factors behind Trump's decision to suspend the "reciprocal tariff."
Trump's announced "reciprocal tariff" initially drove funds toward the bond market, but subsequently, US Treasury bonds, traditionally considered safe-haven assets, were heavily sold off by investors, leading to rising yields. Reuters reported on April 9 local time that the yield on 30-year US Treasury bonds surged nearly 60 basis points in the past three days, briefly breaking through the 5% threshold. If this trend continues, it will be the most severe sell-off since 1981.
On April 10 local time, the yield on 10-year US Treasury bonds rose again, reaching a high of 4.488%. Since touching bottom at 3.99% on April 4, the yield on 10-year US Treasury bonds has risen for five consecutive days. Additionally, the yield on 30-year US Treasury bonds also increased again, reaching a high of 4.957% during the session.
30-year US Treasury bond yield chart CNBC
The New York Times emphasized that US Treasury bonds, supported by the creditworthiness of the US government, have long been regarded as one of the safest and most stable markets in the world. However, recently, the performance of the US Treasury bond market has been quite abnormal. Typically, during times of financial market instability, investors flock to US Treasury bonds as a safe haven, pushing up bond prices and lowering yields. However, last week, the actual situation was the opposite.
"What we have seen since Trump's election is actually challenging the entire foundation of the US dollar as a reserve currency." Ray Attrill, head of foreign exchange strategy at National Australia Bank, analyzed: "In almost no time, the US seems to have lost its risk-free status."
Who is selling US Treasury bonds? Many fingers point to Japan
Notably, just as US Treasury bonds were being heavily sold off, on April 9 local time, Charles Gasparino, a US media personality and senior economics reporter for Fox News, mentioned in a program on Fox News that Trump's 90-day deferral period was a "surrender behavior," and further claimed that Trump's "surrender" was not due to the stock market crash but rather due to the spike in bond market interest rates.
Gaspardino's statement during the program X platform post video screenshot
He even爆料 that the entity massively selling US Treasury bonds in the market is not China, but Japan. "Let me repeat, it's not China, but an ally of the United States that could no longer bear it and sold US government bonds!"
On the same day, similar rumors spread on social media platform X. A capital management company executive publicly stated that a Japanese hedge fund had bet on 10-year US Treasury bonds the previous night with 60 times leverage, and its forced liquidation unexpectedly saved the world from entering a Great Depression: "Brother, we won't forget your sacrifice."
Tolou Capital Management founder Spencer Hakimian X platform post screenshot
Meanwhile, Japanese netizens on X platform continued to post following the trajectory of these rumors, claiming that the Japanese hedge fund Norinchukin (Norinchukin) faced bankruptcy due to failed investments in this round of tariff wars, and in a panic, had to sell US Treasury bonds to obtain liquidity.
Japanese netizens speculate X platform post screenshot
This February, Japan’s Norinchukin Bank, which had suffered huge losses due to failures in overseas bond operations, stated that by the end of the fiscal year in March this year, the final deficit was expected to reach 1.9 trillion yen. At that time, NHK reported that in order to strengthen its financial base, Japan’s Norinchukin planned to increase capital by 1.4 trillion yen and sell foreign bonds, aiming to achieve a profit income of 30 billion to 70 billion yen in the next fiscal year.
These rumors have yet to be substantiated. Japanese veteran media person Ikeda Nobuo believes that there is currently no firsthand information about Norinchukin selling US Treasury bonds, and Fox News reporters may have confused two events.
Regarding a series of rumors about Japan selling US Treasury bonds, Japanese independent financial analyst Hiroki Kubota wrote an article on April 10 analyzing various possibilities. He particularly reminded that considering the timing of the sale during Tokyo trading hours and the simultaneous sale of Japanese government bonds (especially ultra-long-term bonds), which led to an abrupt rise in yields on ultra-long-term government bonds and US Treasury bonds exceeding 0.2 percentage points, "the possibility of Japanese institutional investors is very high."
Japanese financial analyst writes: Japanese banks selling US Treasury bonds may have saved the world Yahoo website screenshot
This analyst stated that it is currently unclear who sold US Treasury bonds during the Tokyo time on April 9 noon and what the purpose was. However, if it was indeed done by Norinchukin, it might really have "saved the world."
This article is an exclusive contribution by the Guancha Observer Network and cannot be reprinted without permission.
Original source: https://www.toutiao.com/article/7492815305761178151/
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