Japanese Investors Sell Most U.S. Debt Since 2022 as Fed Rate-Cut Bets Reverse

Japanese investors sold ¥4.67 trillion ($29.6 billion) of U.S. government, agency and municipal debt in the three months ended March 31, the largest quarterly net sale since the second quarter of 2022, Japan balance-of-payments data released May 13, 2026, showed. The selling came as a roughly 50% surge in crude oil prices after U.S. and Israeli strikes on Iran shifted Federal Reserve expectations. In February, overnight-indexed swaps priced in two Fed rate cuts in 2026; markets now lean toward the possibility of a rate increase as investors reassess inflation risks. Naokazu Koshimizu, senior rates strategist at Nomura Securities, said uncertainty has increased over whether Fed cuts will be delayed or replaced by a hike. Japanese investors sold $4.14 billion of U.S. agency bonds in the first two months of 2026, according to the latest U.S. Treasury data.