When it comes to America's foreign creditors, only two names matter (except for Belgium whose Euroclear service continues to be used by an anonymous entity(s) to buy up US Treasurys): Japan and China. And it is in the Treasury buying and selling dynamics of these two entities that we can see how Japan's monetary policy has impacted its holdings of US paper, which just hit a new all time high of $1,242 billion, while on the other hand Beijing's official holdings of Treasurys have remained unchanged since the summer of 2011, and which in July declined yet another month to just $1,250 billion, the lowest since January 2013.
In fact, as the chart below shows, thanks to Abenomics, in the past two years Japan's holdings of US paper have soared by $150 billion, as the BOJ has forced pension funds, banks and citizens to chase higher yielding US paper, while Chinese holdings haven't budged by an inch.
[9]
At this rate, look for a historic inversion next month when the December TIC data is released and which, all else equal, will show that for the first time since the financial crisis, China will no longer be America's largest creditor, a spot that will be taken over by insolvent Japan.
Yes, the same Japan which as we showed before [10], is forced to monetize all of its own gross treasury issuance or else suffer a completely bond market collapse.
