Japan officials say trust in US Treasuries unchanged

TOKYO: Japan's trust in US Treasuries and its policy of investment in the bonds will not change as a result of the Standard & Poor's downgrade, unnamed officials told Dow Jones Newswires Saturday.

Japan invests most of its foreign reserves in US Treasuries and is the second-largest holder of US debt after China.

"The trust we have in US Treasuries and their attractiveness as an investment will not change because of this action," an unnamed senior government official told Dow Jones.

Another official also said that Japan's investment policy regarding its foreign reserves remains unchanged, the newswire said.

Standard & Poor's cut the US credit rating for the first time in history Friday, saying the country's politicians are increasingly unable to come to grips with its massive fiscal deficit and debt load.

S&P downgraded the rating one notch from the top-flight triple-A to AA+, and added a negative outlook, saying there was a chance it could be cut again within two years if progress is not made cutting the government budget gap.

Japan is unlikely to sell any of its dollar-denominated assets as it is fighting to stem the yen's rise to near a record-high against the greenback.

Together with further credit easing by the Bank of Japan, the Finance Ministry on Thursday intervened in the currency market, selling reportedly up to four trillion yen ($51 billion).

The yen sales, most likely against the dollar, will further increase its foreign reserves, which hit a record high of $1.15 trillion at the end of July.

Of the total, $1.06 trillion was held in securities, most of which are believed to be US Treasuries, finance ministry data showed.

Copyright AFP (Agence France-Presse), 2011