TIC Update – Japan & China’s Treasury Holdings Drop Again

Newsclips — December 16, 2022

Data Reports By Gregory Blaha

Japan and China's holdings of Treasuries dropped again in October. A large part of this is simply a function of Treasuries' terrible returns. In the case of Japan, it may also be a sign of stress for the BoJ.

Japan’s holdings of U.S. Treasury securities fell again in October, following a record drop of almost $80 billion in September. China’s holdings also fell and are easily at their lowest level in over a decade.

 

 

To be sure, a lot of this ‘drop’ in holdings is simply a function of the terrible Treasury returns this year.

In the case of Japan, however, this drop of the past several months may also be a sign of the increased pressure the BoJ is under in maintaining its yield curve control. This theme has been evident in a more timely fashion in other markets, but yesterday’s TIC release could be considered further proof. With Japan selling dollar-based investments, such as Treasuries, to buy yen-based investments, such as JGBs, in an attempt to maintain yield curve control, the country’s holdings of Treasuries become an important metric to watch.

For those interested in diving deeper into the TIC data, the interactive chart below offers a comprehensive look at foreign flows into Treasuries, agencies, corporate bonds, and equities. The parameters of each tab can be changed to view different timelines or flows/holdings of various countries.