“Japan’s US Treasury holdings among tools for trade talks, Finance Minister Kato says”

That headline is via Reuters, recapping the bombshell remark from Kato earlier. Kato made the comments while appearing on a television program.

Kato is Japan’s Finance Minister. He said the country’s massive holdings of U.S. Treasuries could serve as a potential bargaining tool in trade negotiations with Washington — though he emphasized there’s no commitment to actually using that option.

• noted that while Japan’s main reason for holding such large reserves is to maintain sufficient liquidity for possible yen intervention, “we obviously need to put all cards on the table in negotiations. It could be among such cards.”
• he was quick to add a caveat: “Whether we actually use that card, however, is a different question.”

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Japan holds around $1.27 trillion in foreign reserves, most of which analysts believe is in U.S. Treasury debt, though the government doesn’t publicly detail the composition.

Threatening to offload some is a big step.

This article was written by Eamonn Sheridan at www.forexlive.com.