Japanese investors shed over $20 billion in foreign bonds in early April, in one of the largest two-week sell-offs on record, as Donald Trump’s sweeping tariffs sent tremors through global markets. The Financial Times reported that Japanese institutions, including pension funds and banks, were among the most prominent sellers, reacting to a sharp downturn on Wall Street sparked by Trump’s surprise tariff announcement.
According to preliminary data from Japan’s Ministry of Finance, the sell-off included $17.5 billion in long-dated international bonds in the week to April 4, followed by another $3.6 billion the following week. The timing aligns closely with Trump’s April 2 declaration of “liberation day” tariffs, which roiled investor confidence and triggered a dramatic 12 percent plunge in the S&P 500 over just four trading sessions.
While the U.S. equity market partially rebounded after the administration paused most of the new tariffs for 90 days, the ripple effects were already being felt globally. Japan, which holds approximately $1.1 trillion in U.S. Treasuries — the largest such holdings in the world — saw significant shifts in its foreign bond allocations.
Tomoaki Shishido, senior rates strategist at Nomura, told the Financial Times that much of the selling was likely concentrated in U.S. Treasuries or agency bonds, including mortgage-backed securities backed by the U.S. government. He suggested Japanese pension funds may have been forced to rebalance their portfolios after the equity drop knocked their asset allocations out of sync.
Analysts say the sell-off wasn’t just limited to institutional rebalancing. The unwinding of leveraged positions by hedge funds and the collapse of so-called “carry trades” — where investors borrow in low-interest markets like Japan to invest in higher-yielding ones — also played a role. These strategies became riskier amid the spike in U.S. bond yields and a rising yen.
Indeed, yields on 10-year U.S. Treasuries surged in the week of April 11, recording their largest weekly increase since 2001. However, despite the sharp Japanese outflows, Stefan Angrick, Japan economist at Moody’s Analytics, told the Financial Times that the selling wasn’t significant enough to fully explain the bond market’s volatility. “The headline figures may look chunky, but in bond market terms, they’re barely a ripple,” Angrick said, noting the U.S. Treasury market regularly turns over nearly $1 trillion in daily trading.
Still, the exodus from international bonds highlights how tightly interconnected the global financial system remains, and how rapidly policy shifts in Washington can trigger reactions far beyond U.S. borders.
With Trump’s tariff strategy and his pressure on the Federal Reserve already sparking volatility in both stock and bond markets, Japanese investors appear to be signaling growing caution — and reminding markets that the repercussions of U.S. economic policy can be truly global.
