Could prove to be big problem for the US if this is true. We are not talking about Japan buying less treasuries but that they are selling. That only leaves the Chinese as potential buyers of US Treasuries. Chinese are going to ask for higher interest and that would squeeze US growth.
In the past under LDP, Japan would listen to the US but this time around it is perfect storm. No more LDP, Jap Gov debt at approaching 200% of GDP (gross) and money to stimulate domestic economy.
For indication: Chinese hold US$800B (not including HK which by itself holds US$171B), Japan holds US$751B, oil exporting nations (Saudi, UAE, Qatar etc) $185B, India US$39B.
If Japan stops buying (they bought US$125B last year) but sells US$100B that
is a net loss of US$225B. No way the Chinese themselves could absorb that much Treasuries. As you can see from the list, even the "mighty middle east" only has $185B in Treasuries - just a little more than HK.
Also notice that US is selling $61B of short term notes (3 to 6 months) which would hit them doubly hard when interest rises and they need to refi.
Would be very challenging if the US needs more $$$ for stimulus part 2, Afghanistan war cost, Iraq war cost.
I suspect that in this economic downturn the export orientated nations bearing the brunt is not necessary China but the developed nations like Germany, Japan that manufacture the expensive products (factory tooling like robots for new factories) vs the Chinese who are more focus on cheaper daily necessity stuff (you need to replace shoes, underwear, reward yourself with cheap ipods and iphones but kiv that BMW or Mercedes and go buy a Hyundai or Honda Civic or even keep the old car for another 2 years and slap on a set of cheap Chinese tyres! Most of the spare parts for cars are made in China - recently changed front rotors and brand name for replacement part was Brembo - made in China!)
By David Wilson
Dec. 4 (Bloomberg) -- Speculation that the Japanese government plans to sell $100 billion of U.S. Treasury debt to pay for domestic spending may impede the Obama administration’s borrowing plans.
Japan has been this year’s biggest buyer of Treasuries, which means it has done more to help finance the widening U.S. budget deficit than any other country. Its holdings have risen by $125.5 billion, according to data compiled by the Treasury. The comparable figure for China, which surpassed Japan last year as the largest international investor in the securities, is $71.5 billion -- 43 percent lower.
The CHART OF THE DAY shows this year’s total holdings of the two countries in the top panel and tracks the gap between them in the bottom panel.
Japan will inform the U.S. about the possible $100 billion sale, according to a Market News International report yesterday that cited “rumors” from unnamed sources.
“There’s absolutely no such proposal right now,” Chief Cabinet Secretary Hirofumi Hirano told reporters today in Tokyo. “That kind of talk often surfaces at this season.”
The Treasury is selling $74 billion of notes and bonds next week, along with $61 billion in three- and six-month bills, to help finance the deficit. Karthik Ramanathan, the department’s director of debt management, said a month ago that bond-market participants ought to expect $1.5 trillion to $2 trillion of sales in the fiscal year ending Sept. 30, 2010.
In the past under LDP, Japan would listen to the US but this time around it is perfect storm. No more LDP, Jap Gov debt at approaching 200% of GDP (gross) and money to stimulate domestic economy.
For indication: Chinese hold US$800B (not including HK which by itself holds US$171B), Japan holds US$751B, oil exporting nations (Saudi, UAE, Qatar etc) $185B, India US$39B.
If Japan stops buying (they bought US$125B last year) but sells US$100B that
is a net loss of US$225B. No way the Chinese themselves could absorb that much Treasuries. As you can see from the list, even the "mighty middle east" only has $185B in Treasuries - just a little more than HK.
Also notice that US is selling $61B of short term notes (3 to 6 months) which would hit them doubly hard when interest rises and they need to refi.
Would be very challenging if the US needs more $$$ for stimulus part 2, Afghanistan war cost, Iraq war cost.
I suspect that in this economic downturn the export orientated nations bearing the brunt is not necessary China but the developed nations like Germany, Japan that manufacture the expensive products (factory tooling like robots for new factories) vs the Chinese who are more focus on cheaper daily necessity stuff (you need to replace shoes, underwear, reward yourself with cheap ipods and iphones but kiv that BMW or Mercedes and go buy a Hyundai or Honda Civic or even keep the old car for another 2 years and slap on a set of cheap Chinese tyres! Most of the spare parts for cars are made in China - recently changed front rotors and brand name for replacement part was Brembo - made in China!)
By David Wilson
Dec. 4 (Bloomberg) -- Speculation that the Japanese government plans to sell $100 billion of U.S. Treasury debt to pay for domestic spending may impede the Obama administration’s borrowing plans.
Japan has been this year’s biggest buyer of Treasuries, which means it has done more to help finance the widening U.S. budget deficit than any other country. Its holdings have risen by $125.5 billion, according to data compiled by the Treasury. The comparable figure for China, which surpassed Japan last year as the largest international investor in the securities, is $71.5 billion -- 43 percent lower.
The CHART OF THE DAY shows this year’s total holdings of the two countries in the top panel and tracks the gap between them in the bottom panel.
Japan will inform the U.S. about the possible $100 billion sale, according to a Market News International report yesterday that cited “rumors” from unnamed sources.
“There’s absolutely no such proposal right now,” Chief Cabinet Secretary Hirofumi Hirano told reporters today in Tokyo. “That kind of talk often surfaces at this season.”
The Treasury is selling $74 billion of notes and bonds next week, along with $61 billion in three- and six-month bills, to help finance the deficit. Karthik Ramanathan, the department’s director of debt management, said a month ago that bond-market participants ought to expect $1.5 trillion to $2 trillion of sales in the fiscal year ending Sept. 30, 2010.
