Japan - the largest foreign holder of US Treasuries

The Bank of Japan's decade-long fight against deflation and economic stagnation has resulted in near-zero profits domestically, forcing Japanese investors to move their money abroad, often to the United States. As a result, Japan is by far the largest foreign holder of US Treasuries, Japanese banks, pension funds, insurance companies, etc. owning a total of $1.138 trillion at the end of 2023, according to statista.com, which cites data from the US Treasury Department. It is followed by China, with holdings of 816 billion dollars, Great Britain - with 754 billion dollars, Luxembourg - with 371 billion dollars, Canada - with 336 billion dollars, Ireland - with 332 billion dollars, Belgium - with $314 billion and the Cayman Islands with $305 billion.

Despite the Bank of Japan's decision to abandon yield curve controls and negative interest rates, experts do not expect an immediate change in the above-mentioned situation, i.e. in the more than a trillion dollars that Japanese investors have invested in the markets international bonds.

• The Bank of Japan raised interest rates in March for the first time in 17 years

The Bank of Japan (BoJ) decided on March 19 to raise the benchmark interest rate for the first time in 17 years, ending a long-term policy of negative interest rates aimed at stimulating the economy.

At the end of the monetary policy committee meeting on that date, the Bank of Japan announced that it would apply a short-term reference interest rate between 0 and 0.1%, compared to minus 0.1%, which was the level at which it was from January 2016. This was the first decision to raise the cost of credit by the BoJ since February 2007.

"The policy of negative interest rates, combined with other measures to inject money into the economy and keep borrowing costs low have fulfilled their roles," Bank of Japan Governor Kazuo Ueda said at the time. Although Japan's private sector banks and other financial organizations will make their own decisions on interest rates, the BoJ governor said he does not foresee any significant increase.

Japan's central bank has an inflation target of 2% that it has used as a benchmark to determine whether Japan has finally escaped deflationary trends. But the bank remained cautious about "normalizing" monetary policy or abandoning negative interest rates on loans, even after data showed inflation had moved closer to target in recent months.

In March, some analysts quoted by CNBC predicted that the Bank of Japan would change the course of monetary policy in the next two months. According to them, while most major central banks are looking to ease monetary policy after more than two years of aggressive tightening aimed at combating inflation, the Bank of Japan's decision is in the opposite direction.

The Bank of Japan's next monetary policy meeting is scheduled for this week. Analysts expect the key interest rate to remain unchanged. According to the Japan Times, a growing number of economists expect the Bank of Japan to raise interest rates again in October.

"Next week's meeting is to analyze the impact of monetary policy changes," says Naoya Hasegawa, chief bond strategist at Okasan Securities, noting: "I expect another rate hike in October once an improvement is confirmed of spending and consumer confidence, on the back of higher wages and a tax cut."

In an interview earlier this month, the Bank of Japan governor hinted at a chance of an interest rate hike in the second half of this year.