• Japan's Finance Minister confirms potential use of US Treasury holdings in trade negotiations with the US.
• Katsunobu Kato mentions the need to leverage all available tools in discussions with Washington.
• The statement represents a shift from previous positions where such holdings were ruled out as bargaining chips.

Japan’s Finance Minister, Katsunobu Kato, has publicly acknowledged the possibility of using the country's substantial US Treasury holdings—exceeding $1 trillion—as leverage in ongoing trade negotiations with the United States. Kato emphasized that Japan's primary purpose for maintaining such large amounts of US government debt is to ensure sufficient liquidity for yen intervention when required. However, he also stated, "We obviously need to put all cards on the table in negotiations. It could be among such cards," indicating a potential shift in Japan's negotiating strategy amidst escalating trade tensions, according to South China Morning Post and Reuters.

This comment marks a notable change from Kato's statements last month, where he ruled out using Japan's US Treasury holdings as a bargaining tool in discussions with the US, emphasizing a cautious approach to trade accords. The backdrop of Kato's remarks follows significant volatility in the Treasury market triggered by US President Donald Trump's imposition of tariffs on key trading partners like Japan, which had resulted in a global sell-off of US bonds, according to Channel News Asia and India Times.

Kato explained that previous sell-offs might have influenced Washington’s negotiation stance, suggesting that both Japan's market presence and the ongoing financial conditions necessitate proactive dialogue. He stated, "It won't be good for the economy and financial system for markets to be too unstable," reflecting concerns about the impacts of US Treasury yield fluctuations on Japan's economy. Despite these tensions, Kato was clear that discussions did not center around specific currency levels, reaffirming Japan's position against currency manipulation claims from the US, according to South China Morning Post and Channel News Asia.

In the evolving trade discussions, Japan's top negotiator, Ryosei Akazawa, has already confirmed that talks with US Treasury Secretary Scott Bessent have started to deepen around tariffs and economic security cooperation. Akazawa characterized the recent engagement as "frank and constructive" and noted that they anticipated further discussions in mid-May, according to India Times and Reuters.