Amid growing global uncertainty and shifting geopolitical alliances, major Asian holders of U.S. Treasuries are signaling a continued commitment to American debt despite rising interest rates and calls from some quarters to diversify reserves. Contrary to fears of a broad-based "Sell America" trend, countries like Japan and South Korea have not only maintained but in some cases increased their Treasury holdings, reaffirming the deep financial link between the U.S. and its key Asian allies.
This resilience among major foreign holders comes at a critical moment. With U.S. public debt exceeding $34 trillion and the Federal Reserve maintaining elevated interest rates to combat inflation, the cost of borrowing is historically high. This dynamic has raised concerns among economists about whether global investors—especially large sovereign holders—would begin to scale back exposure to U.S. debt in favor of alternative assets or more diversified currency reserves.
Recent data, however, suggests that while some reduction has occurred, particularly by China, other Asian economies have held steady. Japan, the largest foreign holder of U.S. Treasuries, has reduced its exposure only slightly, remaining firmly above the $1 trillion mark. South Korea, Singapore, and Taiwan have also kept relatively stable positions. These countries continue to view Treasuries as a safe haven, especially during global volatility, given the depth and liquidity of the U.S. bond market.
Part of this persistence is strategic. The U.S. dollar remains the dominant global reserve currency, and Treasury securities serve as a key tool for currency stabilization and monetary policy management in export-driven economies. Selling off large volumes of U.S. debt would risk weakening the dollar’s value, which could complicate the trade balances of these nations. Moreover, it would likely trigger volatility in global markets, something Asian central banks are keen to avoid amid fragile economic recoveries.
China presents a different case. Beijing has been gradually trimming its holdings, a process interpreted by some as part of a broader decoupling from the U.S. financial system. While still among the largest holders of Treasuries, China's reduced exposure appears to reflect both geopolitical tensions and a strategic pivot toward diversifying reserves through gold and other assets. Nonetheless, even China has avoided any rapid or disorderly selloff, suggesting a measured approach rather than a radical financial separation.
Market analysts also note that the risk-return profile of U.S. Treasuries remains attractive compared to many alternatives. Despite the rise in yields, many global investors still see U.S. bonds as low-risk instruments in a world where geopolitical uncertainty—from war in Eastern Europe to tensions in the South China Sea—makes asset safety a paramount concern.
From a policy perspective, this continued support offers breathing room for the U.S. government. It provides stability amid ongoing debates over fiscal discipline and debt ceiling negotiations in Washington. Without strong foreign demand, the U.S. would face increased pressure to rely on domestic buyers or risk upward pressure on yields, which could in turn tighten financial conditions across sectors.
An assessment of the current landscape highlights both opportunity and fragility. The continued backing from Asian financial powers reflects enduring confidence in the U.S. economy and its institutional strength. However, it also underscores how interdependent the global financial system remains. Any disruption—whether through political missteps, a credit rating downgrade, or geopolitical escalation—could shift this balance. For now, the ‘Sell America’ thesis lacks broad support, but policymakers cannot afford complacency. Maintaining fiscal credibility and nurturing alliances will be essential to ensure that confidence in U.S. debt does not erode over time.