As the world's second-largest holder of Treasurys, Japan has a lot at stake in the American debt ceiling showdown. But the $1.135 trillion investment as of July - behind only China's $1.277 trillion - is seen more as trapping Tokyo in the middle of the fight, rather than giving it any clout to help resolve it.
Japanese officials see no gain in even threatening to sell the American debt - since such a move would only push down the value of the dollar against the yen, undermining one of their key economic policy goals. (A weaker yen makes Japan's exports more competitive, a big factor behind the past year's stock market boom). Treasurys dumping could also end up forcing losses on the Japanese banks that remain large holders of U.S. sovereign debt.
Japanese officials are in constant touch with the Treasury Department, but have no ties with Congress. Perhaps the most effective thing they can do would be to join the growing global chorus of public concern, especially at the upcoming G20 meetings in Washington. That may be openly welcomed by the Treasury as a not-so-subtle way of pressuring Congress to the negotiating table.
"The Treasury probably wants them (other countries) to say things against the Republicans," said one official familiar with financial regulatory issues.
The consensus view among Tokyo policymakers: the next week will be nerve-wracking, but Washington will, in the end, find a way to avoid default.
Source: The Wall Street Journal
Source: The Wall Street Journal
