US-Japan Intervention Sparks Concern Over Japanese Demand for Treasurys

A rare joint intervention by the US and Japan to support the yen has drawn attention to another challenge facing Treasurys.

The coordinated effort, which saw a rebound in the dollar-yen pair from nearly four-decade lows, has investors worried about the potential impact on Japanese demand for US government debt.

Japan is the largest foreign holder of US Treasurys as of May, according to Treasury data, and any large-scale sales could put upward pressure on Treasury yields.

ING strategists wrote in a note that the higher risk premium of the yen does not immediately trigger large spillovers to markets abroad, but the selling of UST holdings by Japan would pose a more material risk.