Japan, After Trump's tariff announcement, overseas bonds worth 30 trillion won sold

World's largest holder of U.S. treasury bonds, Japan (Source: AFP)

As President Trump's announcement of high tariffs shocked the global financial market, it was found that Japanese investors sold off overseas bonds worth about 30 trillion won. The market believes that a significant portion of this selling could be U.S. treasury bonds.

The Financial Times reported on the 22nd, citing data from the Japanese Ministry of Finance, that private institutions, including banks and pension funds in Japan, successively sold long-term foreign currency bonds worth 17.5 billion dollars over a week from the end of March to April 4, and 3.6 billion dollars the following week. The total selling volume for the two weeks was 21.1 billion dollars, the largest since Japan started collecting related statistics in 2005.

Japan is the world's largest holder of U.S. treasury bonds with a total of 1.1 trillion dollars. Therefore, Japan's international bond trading trend is considered an indicator that indirectly reflects the U.S. treasury bond market.

This sell-off occurred shortly after President Trump formalized the imposition of reciprocal tariffs in early April. At the same time, the U.S. stock market plunged, and the S&P 500 index fell 12% in just four days. The bond market also took a hit, with the 10-year treasury yield climbing from 4.5% to 4.6%, marking the largest weekly increase since 2001.

The Japanese Ministry of Finance did not specify what types of bonds were sold, but Tomoaki Shishido, chief rate strategist at Nomura Bank, analyzed that "most of the selling is likely to be U.S. treasury bonds or agency bonds guaranteed by the U.S. government." He added, "Pension funds may have adjusted portfolios unbalanced by the stock market's decline, and banks or insurance companies may have taken measures to reduce interest rate risk."

Some interpret that Japanese financial institutions have engaged in large-scale asset sales by liquidating the carry trade strategy they had employed. This structure of raising funds in low-interest Japan to invest in assets in high-interest countries like the U.S. has unwound due to increasing trade uncertainties.

However, Stephen Angrick, an economist at Moody's Analytics covering Japan, evaluated, "The scale of Japan's sell-off is quite large, but the U.S. treasury bond market is a vast market with nearly 1 trillion dollars in average daily transactions," adding, "It is difficult to fully explain the sharp short-term rise in interest rates."

This large-scale bond sell-off by Japan serves as an example of how U.S.-originated policy risks impact the global capital market, and vigilance over major countries' capital flows is expected to rise temporarily.