Data from the Federal Reserve's custody accounts shows that Japan's holdings of US Treasuries saw their first monthly decline during the period when it was suspected of intervening in the foreign exchange market, sparking market debate over whether Japan liquidated US bonds to fund support for the yen. For the week ending May 6, Fed data indicated that the balance of US Treasury securities held in custody for foreign official and international accounts decreased by $8.7 billion to $2.73 trillion. Furthermore, since late April, the USD/JPY exchange rate has decoupled from the movements in the 10-year US Treasury yield. According to Bloomberg estimates, Japan's Ministry of Finance spent approximately $54.7 billion buying yen during the same period. Rodrigo Catril, a senior foreign exchange strategist at an Australian bank in Sydney, noted: The changes in the custody accounts appear to align with the timing of the intervention instructed by Japan's Ministry of Finance to the Bank of Japan. Yuxuan Tang from JPMorgan pointed out that the Bank of Japan reallocated funds from its reserves, enabling Japanese authorities to "execute operations during US trading hours, when US Treasury market liquidity is most abundant, helping to minimize market disruptions." He added that this is also why Japanese authorities prefer to utilize short-term US Treasuries for such operations. Japan is the largest foreign holder of US Treasury securities. If Japan's holdings have indeed been reduced, it could exert further upward pressure on US Treasury yields. Notably, the $8.7 billion decline shown in the custody account data may represent only a small portion of the impact on US Treasury supply and demand from this intervention. Shusuke Yamada, a foreign exchange and rates strategist at an American bank in Tokyo, noted in a research report that, based on historical intervention cases, the cash portion of Japan's foreign exchange reserves typically does not show a significant decline. He stated: Assuming the same holds true this time, it implies a deterioration in supply and demand conditions in the relevant bond market—commonly understood as the US Treasury market—of approximately $70 billion. This estimated scale far exceeds the decline reflected in the Fed's custody accounts. This potential bond-selling by Japan comes at a time when the US Treasury market is already under pressure. Rising oil prices and market concerns that conflict involving Iran could exacerbate the US fiscal deficit have continued to push US Treasury yields higher. Rodrigo Catril noted that historical experience suggests foreign exchange interventions are often sporadic, but "if this becomes a regular occurrence, it could pose a substantive problem for the US Treasury market." Against this backdrop, it is reported that US Treasury Secretary is set to visit Japan and is expected to meet with Japan's Prime Minister, Finance Minister, and Bank of Japan Governor.