Japanese finance minister says selling U.S. bonds a "card on the table"

The bond market has significant influence over President Trump's policymaking, and a subtle threat from the Japanese government could impact his stance on trade with Japan. Japan is the largest foreign holder of US Treasuries, with over $1.13 trillion in holdings, giving it considerable leverage in trade talks. Japanese Finance Minister Katsunobu Kato recently stated that these holdings are a "card on the table" in trade negotiations, implying that Japan could potentially dump its US Treasury holdings if necessary. This would likely cause US interest rates to spike, making it more expensive for the US to finance its budget deficits and straining homebuyers and corporate borrowers. The Japanese government's willingness to acknowledge this possibility represents a shift in its messaging, as it has historically been reluctant to mention such a threat. If Japan were to dump its US Treasury holdings, it could have significant consequences for the US economy, including higher interest rates and disruption to currency markets. Japan is a crucial ally and one of the US's largest trading partners, making a trade deal with the country a priority for the Trump administration. Despite ongoing negotiations, progress has been slow due to disagreements over tariffs on the auto industry, which is vital to Japan's economy. The Japanese government's threat to use its US Treasury holdings as leverage in trade talks is a significant development, and it remains to be seen how the situation will unfold. The potential consequences of Japan playing its "card" could be devastating for the US economy, making it a high-stakes situation for both countries.