Japan tops China as buyer of US bonds

Japan overtook China in February as the top foreign holder of US Treasury securities, a position Japan last held in August 2008.

In its monthly report on bond holdings, the Treasury Department said on Wednesday that total foreign holdings of Treasury debt dipped 0.9 percent in February to $6.16 trillion, down from a record $6.22 trillion in January.

The holdings of China, normally the top holder of Treasury debt, slipped 1.2 percent to $1.22 trillion. Japan's fell 1.1 percent from January. China's decline was a bit larger, allowing Japan to jump into the top spot, $700 million above China.

China overtook Japan for the top spot in ownership of US Treasury debt in 2008 as the financial crisis and a deep recession pushed up US government borrowing to finance government deficits. The US deficit topped $1 trillion annually for four consecutive years.

Private analysts had been forecasting that Japan would surpass China's holdings of Treasury debt this year given current economic trends in both nations.

China's economy has been slowing, and growth of its exports has been tapering, giving the country less to invest overseas. It has also been seeking to diversify those investments, leaving less to invest in US government bonds.

The Japanese central bank, meanwhile, is engaged in an aggressive effort to boost the country's money supply to bolster the economy and fight low inflation. That means there is more money to invest overseas. Japanese investors have been attracted to dollar holdings because of higher rates of return on dollar-denominated investments.

Japan's holdings of Treasury debt are $13.6 billion higher than they were a year ago, while China's holdings are $49.2 billion lower than a year ago.

China is also being pressured by the Obama administration to allow its currency to rise in value against the dollar.