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Japan’s finance minister has publicly identified the country’s more than $1tn holdings of US Treasuries as a “card” in its trade negotiations with the Trump administration, in a rare baring of teeth by America’s closest ally in Asia.
Speaking during a television interview on Friday, Katsunobu Kato was asked whether Japan would use its traditional stance as a non-seller of Treasuries as a tool in trade talks with Washington.
“It does exist as a card,” said Kato, adding that “whether or not we use that card is a different decision”.
Japanese holders, including the government, own $1.13tn of Treasuries, the largest hoard held by a foreign nation.
There is no suggestion that Tokyo is considering any sales of official Treasury holdings. But traders said that even the reference to such an action as a “card” could add to volatility in a US bond market that has lurched violently since April 2 when Donald Trump announced sweeping “reciprocal” tariffs on US trade partners. Treasuries were swept up in a wholesale sell-off of American assets before recovering part of their losses after Trump paused the tariffs for 90 days.
Analysts said that Kato’s comments were a natural reaction to the economic threat posed by Trump’s trade war, one that Japan’s prime minister has described as a “national crisis”.
“This is a street fight: promising not to use one of your strongest, most brutal weapons would be both naive and reckless,” said Nicholas Smith, chief Japan strategist at CLSA. “You don’t need to use the weapon: just brandish it.”
Japan’s status as the biggest foreign holder in the Treasury market could become even stronger as a negotiating tool if China decides to weaponise its own Treasury holdings in its trade confrontation with the US.
Kato’s comments, which break with a long habit of extreme caution on the subject, emerged just hours after the latest round of talks in Washington between Japan’s chief negotiator Ryosei Akazawa and his counterparts in the Trump administration, including Treasury secretary Scott Bessent.
Talks are now expected to intensify in May, with Akazawa indicating that a trade deal may be possible in June. Diplomatic sources said that the meeting had included discussion of lowering supposed non-tariff barriers to imports of US cars, as well as measures Japan might take to reduce its large trade surplus with the US by expanding purchases of energy and agricultural products.
“The fact that the usually extremely guarded and diplomatic finance minister spoke up on national TV about what is arguably Japan’s biggest asset in dealing with America confirms the growing confidence of Japan’s elite in their dealings with the US,” said Jesper Koll, a director at the online brokerage Monex Group.
Kato has been directly involved in the negotiations with the US and held bilateral talks with Bessent in the last week of April. The finance minister emerged from that meeting without offering details on specific demands from the US side.
