Time for Japan to think more deeply about holding U.S. Treasuries
Lee Jay Walker
Modern Tokyo Times
Japan must implement an independent economic policy which is based on helping the people of Japan and the future of this nation. Currently, the government of Japan holds $900 billion dollars of U.S. Treasuries and only China owns more internationally but given the ills of the American economy then should Japan maintain such a high holding?
Standard & Poor downgraded the credit rating of America and clearly the dollar is sliding and the American government appears either “toothless” or is focused on manipulating the value of the dollar against economic rivals. Either way, America does seem aloof about the impact of the dollar and major Japanese companies are feeling the pain.
Obviously, currencies always fluctuate when government control isn’t allowed to manipulate like China. However, a collective approach to stability will be taken by major powers during times of upheaval in order to reduce the impact of the economic crisis.
Kenji Nakanishi, who belongs to a new opposition party called Your Party, indicated that Japan must focus on the well-being of its people and that the government should think seriously about selling U.S. Treasuries.
Kenji Nakanishi stated “…..that Japan shouldn’t sell all its holdings at once, but should reduce them by about ¥10 trillion each year, and earmark some of that money for recovery spending in the Tohoku region, which was devastated by the March 11 earthquake and tsunami.”
However, the ruling party in Japan made it clear that Japan will continue to buy more U.S. bonds and that the government will not sell bonds. This policy, in light of America’s credit rating being downgraded and growing uncertainty about the dollar seems rather limited in scope.
The Chief Executive of Euro Pacific Capital, Peter Schiff, commented that “The more money the world lends to America today, the more money they’re going to have to lend tomorrow……..It’s a giant Ponzi scheme. Nobody is ever going to get their money back.”
The economy of Japan faces enormous problems and this applies to the huge public debt that it holds. It is true that Japan does have enormous reserves and recent support of the Euro shows the power that Japan still maintains. However, Japan is not in a position to weaken or assist other nations which may be detrimental to the long term future of Japan.
The financial balancing act in Japan is already problematic and it appears that Japan is helping America for no real reason apart from the special relationship between both nations. Nobody is talking about this special relationship coming to an end but the vibrant years of the 1960s to late 1980s no longer applies to Japan.
If government and economic leaders in Japan believe that maintaining huge U.S. bonds is in the interest of Japan. Then this is fine. However, if this policy is not based on the interests of Japan then this policy is wrong and currently it appears that this serious issue is not being debated openly out of fear of upsetting the applecart.
Therefore, an alternative policy should at least be put on the agenda because proposed tax hikes during the current economic reality of Japan, alongside buying more U.S. bonds from a nation which was recently downgraded, does appear risky?
Why not utilize part of the holdings in America in order to help areas damaged by the earthquake and tsunami by a gradual sell-off policy? Also, a more diverse economic policy should at least be on the table and debated openly.
If no change is the final outcome and this is based on being in the best interest of Japan then all well and good. However, if an open debate and policy renewal can’t be discussed then something is wrong and political leaders should be taken to task by the Japanese electorate.