Japanese Holdings of U.S. Government Debt Top $1T for First Time

January 20, 2012 - 1:21 PM
Japanese prime minister, Obama

President Barack Obama meets with Japanese Prime Minister Yoshihiko Noda in Honolulu, Hawaii, on Nov. 12, 2011. (AP Photo/Charles Dharapak)

(CNSNews.com) - Japanese holdings of U.S. government debt have topped $1 trillion dollars for the first time, according to data released this week by the U.S. Treasury Department.

Entities in Japan held $1.0389 trillion in U.S. Treasury securities as of the end of November, according to the Treasury. That was up from the $979 billion in U.S. Treasury securities that the Japanese held at the end of October.

China is now the only nation other than Japan where entities hold more than $1 trillion in U.S. government debt. As of the end of November, according to the latest Treasury data, the Chinese held $1.1326 trillion in U.S. Treasury securities. That was down from the $1.1341 trillion in U.S. Treasury securities the Chinese held at the end of October.

As little as a decade ago--at the end of November 2001--the Japanese held only $315.4 billion in U.S. government debt, according to historical Treasury Department data. At that time, Japan was the No. 1 foreign owner of U.S. debt, exceeding Mainland China, which then was the No. 2 holder of U.S. government debt with only $77.9 billion in holdings.

Individually, both the Japanese and the Chinese now own more U.S. government debt than all foreign entities combined did a decade ago.

In fact, over the past decade, overall foreign ownership of U.S. debt has skyrocketed from $1.0363 trillion as of the end of November 2001 to $4.7509 trillion as of the end of November 2011. That is an increase of $3.7146 trillion--or 279 percent.

Between January 2009, when Barack Obama became the U.S. president, and the end of November 2011, Japanese holdings of U.S. debt climbed 63.7 percent, rising from $634.8 billion to $1.0389 trillion. During the same period, Chinese holdings of U.S. debt climbed $739.6 billion to $1.1326, an increase of 53.1 percent.

While Japanese holdings of U.S. Treasury securities have climbed rather steadily over the past three years, Chinese holdings actually peaked at $1.1753 in October 2010 and declined in 8 of the 13 months between then and November 2011.

In recent times, the Chinese have dramatically decreased their holdings U.S. Treasury bills, which are short-term debt instruments that mature in one year or less. Chinese ownership of T-bills peaked at $210.407 billion at the end of May 2009 and dropped to $2.336 billion by the end of November 2011. That represents a 99 percent (98.88) decline in Chinese ownership of T-bills.

As of the end of November, according to the Treasury, the average interest rate on T-bills was only 0.076 percent compared to an average interest rate of 5.691 percent on long-term Treasury bonds.

As of the end of November, there was only one entity that owned more U.S. debt than either the Chinese or the Japanese. That was the Federal Reserve. According to the Federal Reserve’s January 2012 monthly report, it owned $1.672 trillion in U.S. government debt as of the end of November, making it the single largest holder of U.S. government debt.

The combined total of the U.S. government debt owned either by the Federal Reserve or by foreign interests was $6.4229 trillion at the end of November, according to the Treasury data. That equaled 61.8 percent of all U.S. government debt held by the public, which was $10.3899 trillion as of the end of November.

As of that time, the so-called “intra-governmental debt”---money that the Treasury has borrowed out of government trust funds such as the Social Security trust fund---equaled $4.7205 trillion.

The total U.S. government debt, including both debt held by the public and intra-governmental debt, was $15.11049 trillion at the end of November. As of the close of business on Jan. 18, it stood at $15.23627 trillion.