In early April 2025, Japanese private investors, including banks and pension funds, sold more than $20 billion in foreign bonds, marking one of the largest sell-offs since 2005. This significant move was triggered by market volatility following President Donald Trump’s announcement of new tariffs on April 2, referred to as “Liberation Day.”
According to preliminary data from Japan’s Ministry of Finance, $17.5 billion in long-dated foreign bonds were sold in the week ending April 4, with an additional $3.6 billion sold the following week. Analysts suggest that a substantial portion of these sales involved U.S. government securities or agency bonds backed by the U.S. government.
Japan remains the largest foreign holder of U.S. Treasury debt, with a portfolio valued at approximately $1.1 trillion. Consequently, its investment decisions are closely monitored as indicators of broader market sentiment.
The S&P 500 index experienced a 12% decline in the four trading days following the tariff announcement, while the yield on 10-year U.S. Treasury notes surged to levels not seen since 2001. These developments prompted Japanese investors to reassess their portfolios, with pension funds potentially selling assets to rebalance in response to declining U.S. stock prices. Additionally, some sales were linked to the unwinding of carry trade strategies, where investors borrow in low-interest-rate currencies like the yen to invest in higher-yielding assets abroad.
Despite the scale of these sales, Moody’s analysts note that the volumes are moderate relative to the daily turnover of the U.S. debt market, which averages around $1 trillion. Therefore, while significant, these sales alone are unlikely to have caused the spike in yields.
