Japan (further) walks back Treasury threat, says no plan to use holdings as trade leverage

I posted the threat from Japan’s finance minister Kato back on Friday. Kato had raised eyebrows by suggesting that Japan’s massive holdings — more than $1 trillion and the largest globally — could be “a card” in trade talks:

• Japan’s huge US Treasury holdings among tools it can wield in trade negotiations with the US, then adds whether Japan wields that card is a different question

This is a big threat and Kato watered it down as soon as the words left his gob:

• “Whether we actually use that card, however, is a different question.”

He further dialled it back over the weekend. Kato said Sunday the country has no intention of threatening to sell its U.S. Treasury holdings in trade talks with Washington, softening earlier remarks that hinted otherwise.

• “The comments weren’t meant to suggest selling Treasury holdings,” Kato told reporters in Milan, explaining that his earlier statement was in response to a hypothetical about reassuring the U.S. such sales wouldn’t happen easily. He clarified, “We don’t plan to use sale of U.S. Treasury holdings as a bargaining tool in the negotiations.”
• Kato reiterated the primary purpose of the holdings is to ensure liquidity for potential yen intervention: “This has been our stance.”

  Kato added that “whether Japan actually uses that card is a different question,” underscoring that the reference was theoretical, not a policy signal.

USD/JPY update as trade kicks off for the week:

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