Japan’s $29.6B Treasury sales lift U.S. yields, hit Bitcoin

Japan sold $29.6 billion of U.S. government, agency and local authority debt in the first quarter of 2026, the largest quarterly net sale since the second quarter of 2022. The amount equals about 2.4% of Japan’s $1.24 trillion in U.S. securities holdings.

Japan remained the largest foreign holder of U.S. Treasuries at $1.24 trillion in February 2026, ahead of the U.K. at $897.3 billion and mainland China at $693.3 billion. The quarterly outflow reflected changes in where Japanese institutions seek yield.

Domestic Japanese yields have risen. The 10-year Japanese government bond yield climbed above 2.6%, its highest level since 1997, and the 30-year reached about 4%. The Bank of Japan reduced its monthly purchases of Japanese government bonds from ¥5.7 trillion in August 2024 to ¥2.9 trillion in the first quarter of 2026. In April the BOJ kept its short-term policy rate at 0.75%; three of nine board members voted for a rate increase, and the BOJ raised its core inflation outlook for fiscal 2026 to 2.8%.

Higher domestic yields and smaller BOJ bond purchases increased the appeal of keeping funds at home. Japanese investors continued to sell foreign bonds into April, though the pace of sales slowed to a three-month low.

The shift in demand for Treasuries occurred alongside a broader change in global rate expectations after oil prices rose earlier in the year. When external demand for U.S. government debt weakens, the market can require higher yields to attract buyers.

U.S. long-term yields moved higher in the spring. The 30-year Treasury yield reached about 5% in late April and the 10-year climbed to roughly 4.54% in mid-May. Movements in Treasury yields affect mortgage rates, corporate borrowing costs, bank balance sheets, collateral markets and prices for other sovereign and corporate debt.

Market-implied expectations for U.S. policy tightened. A commonly used probability measure placed better than a 44% chance of a Federal Reserve rate increase by December 2026. April’s U.S. consumer price reading came in at 3.8% year over year.

Higher risk-free yields compete with speculative assets. Bitcoin traded near $78,000 in mid-May and failed to close above its 200-day moving average of about $82,228 on five consecutive attempts in that period.

Market-structure risks could magnify moves in sovereign bonds. Citigroup estimated that elevated volatility in Japanese government bonds could force risk-parity funds to sell as much as $130 billion in U.S. bonds, which would add selling pressure on Treasuries.

Sovereign borrowing needs are large: projections for 2026 put gross borrowing across OECD members near $18 trillion, with net borrowing around $4 trillion. That supply will require buyers in global debt markets.

Japan’s role as the largest foreign holder of Treasuries and the recent repatriation of capital coincided with higher domestic yields and greater sovereign issuance abroad. The flows and market structure developments outlined above have contributed to recent moves in U.S. yields and to pressure on risk assets including Bitcoin.