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Currently, Japan and China are the largest overseas buyers of U.S. Treasury bonds, which leaves the United States quite helpless as Japan and China join hands to massively sell off U.S. debt.

At the same time, the two countries have independently developed digital currencies, laying the foundation for further de-dollarization.

In the process of the United States continuously raising interest rates, China and Japan have also adopted a non-interest rate hike approach to deal with the economic crisis.

Since the second half of last year, many financial institutions in Japan have even sold U.S. debt and then turned around to buy RMB bonds.

What kind of layout will China and Japan join hands to complete next?

01, Selling off $442.1 billion in U.S. debt

Let's first take a look at the changes in the U.S. debt held by China and Japan. At the end of December 2021, Japan held $1.304 trillion in U.S. debt, while mainland China held $1.0687 trillion.

Now the latest data has changed dramatically, with Japan's holdings of U.S. debt falling to $1.0818 trillion, and China's even more significantly falling to $848.8 billion.

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That is to say, in this more than a year, China and Japan have sold off U.S. debt, totaling as high as $442.1 billion.

Selling off U.S. debt can not only reduce the losses caused by the decline in the United States but also suppress the exchange rate of the U.S. dollar and support the exchange rate of their own countries. Coincidentally, in 2022, the currencies of China and Japan depreciated to some extent due to U.S. interest rate hikes, so the simultaneous selling off by China and the United States is very normal.02, Utilizing Digital Currencies to De-Dollarize

In the meantime, in order to minimize the use of the US dollar in future international trade, many countries and regions are currently developing digital currencies, with China and Japan already taking the lead in this regard.

As digital currencies continue to advance, the future development of the Chinese yuan can also avoid interference from the SWIFT system as much as possible. It is important to note that the United States often uses this system to exclude some countries from the international settlement system.

Regarding the increasing number of countries de-dollarizing, it is unexpected that recently, at a World Economic Forum meeting, the UN Secretary-General actually stood on the side of the United States, losing his neutral position.

He stated that the US dollar is irreplaceable, implying that he does not wish for the Chinese yuan to replace the US dollar.

At that time, the Russian Foreign Minister expressed his opposition to this: Currently, an increasing number of countries are de-dollarizing, precisely because of American hegemonism, and the UN Secretary-General's speech this time was largely biased towards the United States.

A long time ago, many issues such as the Nord Stream explosion and the origin of the COVID-19 pandemic are highly likely to be operations by the United States, but the UN's investigations into the United States have been biased in favor of the US.

De-dollarization is an inevitable trend in the development of the world, which is also beneficial to the economic development of various countries and world peace. It is just unexpected that the United States would attempt to hijack the UN to prevent countries from de-dollarizing.

03, Counterattacking the US Dollar

In fact, during this recent period, some economic measures taken by China and Japan do indeed exhibit an unexpected synchrony.The United States, in an effort to combat inflation, has been continuously raising interest rates, tightening the money supply, and shutting down the printing presses. However, it was unexpected that China and Japan, two of the world's largest economies, did not participate in the interest rate hikes throughout the process. In fact, China has been lowering interest rates, and Japan has been engaged in quantitative easing.

This has, to a certain extent, affected the effectiveness of the dollar's monetary contraction.

More importantly, it is highly likely that in 2023, the Chinese yuan and the Japanese yen will launch a counteroffensive against the US dollar.

As the Federal Reserve's interest rate hikes gradually come to an end, the depreciation of the US dollar has become inevitable. We can now clearly see that the yuan has been appreciating continuously as global funds keep buying it. On the other hand, Japan is very likely to raise interest rates in response, which will also strongly promote the appreciation of the yen.

If this happens, under the suppression of the significant appreciation of the yuan and yen, the depreciation of the US dollar will be even more severe. At that time, the intensity of investors' selling of US Treasuries may be several times or even dozens of times greater than it is now.

At the same time, Japan also has a positive outlook on China's economic development. Due to China's low inflation environment, purchasing yuan-denominated bonds can yield good returns.

Therefore, since the second half of last year, some financial institutions in Japan have started to reduce their holdings of US Treasuries and instead bought yuan-denominated bonds. The main buyers are some pension and health insurance companies that aim for long-term holding.

The unintentional alliance between China and Japan further confirms the continuous decline of the dollar's status.