BY MAKIKO YAMAZAKI
Japan has no plans to threaten to sell its $1 trillion-plus holdings of US Treasuries in trade talks with Washington, its finance minister said, clarifying earlier remarks that the bond holdings could be used as a bargaining chip.
“My comments were made in response to a question whether Japan could, as a bargaining tool in trade negotiations, explicitly reassure Washington it wouldn’t sell its Treasury holdings easily,” Japanese Finance Minister Katsunobu Kato said.
“The comments weren’t meant to suggest selling Treasury holdings,” Kato told a press conference in Milan.
In a television interview on Friday, Kato said Japan’s US Treasury holdings could be used as a card in trade negotiations, raising explicitly for the first time its leverage as a massive creditor to the United States.
Kato in the interview added whether Japan actually uses that card is a different question.
At the press conference on Sunday, Kato repeated that the primary purpose of Japan’s US Treasury holdings – the largest in the world – is to ensure it has sufficient liquidity to conduct yen intervention when necessary.
“This has been our stance, and we don’t plan to use sale of US Treasury holdings as a bargaining tool in the negotiations,” he said.
Japan’s economy probably contracted for the first time in a year in the first quarter, weighed down by softer domestic demand and imports outperforming exports, a Reuters poll showed, as US President Donald Trump’s trade policies dim the growth outlook.
Real gross domestic product (GDP) is forecast to have contracted an annualised 0.2 percent in January-March, according to a median forecast of 15 economists. That would mark a significant cool down from the previous quarter’s 2.2 percent expansion and would be the first contraction since the first quarter last year.
