Japan has overtaken China as the top foreign holder of US Treasury securities, a position the country last held in August 2008. In its monthly report on bond holdings, the Treasury Department says total foreign holdings of Treasury debt dipped 0.9% in February to $6.16 trillion, down from a record of $6.22 trillion in January. The holdings of China, normally the top holder of Treasury debt, slipped 1.2% to $1.22 trillion; Japan's fell 1.1% from January. China's decline was a bit larger, allowing Japan to jump into the top spot, $700 million above China, which overtook Japan for the top spot in ownership of Treasury debt in 2008 as the financial crisis pushed up US government borrowing.
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, and Japanese investors are attracted to dollar holdings because of higher rates of return.