Japan Holdings of U.S. Treasury Bonds Likely to Fall in Coming Months

WASHINGTON -- Japan increased its holdings of U.S. government debt for an eighth straight month in January. But the second-largest holder of U.S. Treasury bonds will likely scale back its purchases of foreign holdings, and even sell off some, in coming months to divert money toward rebuilding a nation devastated by a powerful earthquake and an ensuing nuclear crisis.

The Treasury Department says Japan boosted its holdings 0.4 percent to $885.9 billion in January.

Economists say a reduction in Japan's foreign holdings would put some upward pressure on U.S. interest rates. But they cautioned the change would have a limited impact. They said the Federal Reserve, which has been buying Treasury securities as part of its efforts to keep interest rates low, would move to counteract any significant increase in rates.