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LIVE MARKETS-Japan's vanishing T-bill stash could be about to make a comeback

By Reuters News

Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com

JAPAN'S VANISHING T-BILL STASH COULD BE ABOUT TO MAKE A COMEBACK

Japan's holdings of short-term US government debt have fallen significantly, but Deutsche Bank analysts led by Steven Zeng say that could set up a significant buying wave.

The latest Treasury International Capital data show Japan held just $31 billion in T-bills as of August. That is 2.9% of its US Treasury portfolio, and both figures are historical lows. The bills were likely sold to fund several rounds of currency intervention to support the yen, Deutsche said.

The drawdown is stark compared to historical levels. Until 2022, bills made up a relatively steady 5-7% of Japan's Treasury holdings. As Federal Reserve tightening widened the rate gap with Japan and weakened the yen, that share climbed to 10-13% by early 2026.

Now the bank sees room for a rebuild. It estimates Japan could add $80 billion to $100 billion in bills by the middle of next year. For comparison, other foreign official investors hold roughly 10% of their Treasury portfolios in bills.

Bills recently rebounded quickly after a brief cheapening, which points to solid demand. Deutsche Bank says renewed Japanese buying and resilient bill spreads should ease worries that heavy bill supply will overwhelm the market in the near term.

(Karen Brettell)

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