Since Japan owns $644 billion of our national debt, do they have the option of asking us to pay up?

[gatorboy]

I keep hearing dicsussion on news shows about how Japan is going to pay for this. On CNN they even had a few guests that said the debt for this clean up will go directly to the people of Japan. But then I remember that as far as the national debt goes, Japan holds the biggest chunk. So what options do they have when it comes to getting some of that money back for re-building?

[roamer65]

1. They can start selling US Treasuries.

That will tank the bond market if they do it.

[Name removed]

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[Statistical]

2. No. No more than your bank can ask you to "pay up" on a mortgage.

A bond is contract between the debtor (US govt) and the creditor (bond holder).

So for example on a 30 year bond the creditor will receive 60 interest only payments (2 per year) from the debtor and then be repaid the principal after 30 years.

Example:
you or Japan purchase $10,000 30yr bond @ 5% from US govt.
6 months from now you would receive $250. 6 months later another $250. Remember it is interest only (unlike your mortgage which is interest & principle). That will continues to happen for 30 years and total of 60 payments. Then and only then will the govt pay back your $10,000 principle.


Nothing more, nothing less.
There is no option to "call" the bond early or demand payment.

They can sell the Treasury bonds they own to another investor on the open market. That doesn't change anything relative to US govt. Same terms, same time period, same payment they just go to another creditor.

Japan won't dump the bonds on the market because that would be stupid. It would devalue the other bonds they hold.

[Yo_Mama]

5. Sorry, didn't see your excellent explanation. n/t

[damntexdem]

3. Only if they want to crash the international economic system even further.

And lose the investments they can't sell off in time.

If you're going to owe, owe a lot -- be "too big to fail."

[Yo_Mama]

4. They can sell their bonds.

But they can't present them and demand early repayment, just like your bank can't tell you that because it needs money, you have to pay back your 30-year mortgage after five years.