China remains Japan’s largest foreign creditor

China remains Japan's largest foreign creditor as the latest figures show China increasing Japanese government debt holdings by 14 percent last year to 20 trillion yen by the end of 2012. This comes as both the United States and the UK trimmed its holdings of Japanese sovereigns, by 15 and 23-percent respectively as risk appetites improved in the latter half of last year and demand for safe haven assets, such as Japanese government bonds, fell.

One other factor causing investors to move away from JGBs is a lower yen, which will cause valuation losses as it weakens against major global currencies. Foreign ownership of Japanese government debt is relatively small since domestic investors hold 90 percent of it.