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Japan overtakes China as largest US debtholder

Published:Sunday | December 18, 2016 | 12:00 AM

Japan surpassed China in October as the largest foreign owner of United States Treasury securities, the first time the countries have swapped places in nearly two years. Total foreign holdings fell for a fourth month.

The Treasury Department says that total foreign holdings dropped 1.9 per cent to US$6.04 trillion in October. Foreign holdings of Treasury debt are down 3.9 per cent from a recent peak of US$6.28 billion set in March.

Both Japan and China cut their portfolios in October. But China's reduction was a larger 3.6 per cent to US$1.12 trillion. Japan trimmed its holdings by a smaller 0.4 per cent, which meant its holdings of US$1.13 trillion exceeded China's total.

It marked the first time that Japan has been No. 1 since early 2015. China has held the top spot for a number of years. The last time it was displaced was for one month in February 2015 when Japan, normally No. 2, moved into the top spot.

In October, Ireland was in the third spot in terms of total holdings, with US$271 billion in Treasury debt followed by The Cayman Islands, a Caribbean banking centre, with US$262 billion in Treasury debt.

Total federal government debt now stands at US$19.8 trillion and is projected by the Congressional Budget Office to increase by US$8.6 trillion over the next decade, underscoring America's need to keep attracting foreign investors.

- AP