The internet claimed that a great sell-off had begun and that the dollar’s reign was coming to an end. In reality, Japan and China remain two of the largest holders of U.S. debt, and foreign holdings of U.S. Treasury securities continue to rise worldwide.
Recently, internet sources have been heralding the coming collapse of the U.S. dollar, citing claims that Turkey, China, and Japan are allegedly “dumping” the dollar. The reality is far less condemning.
Turkey is selling dollars to prop up its economy during an ongoing economic crisis. Japan’s sales of U.S. Treasuries are being driven primarily by private investment funds, not the Bank of Japan, as rising Japanese interest rates make domestic government bonds more attractive investments.
Meanwhile, China has reduced its holdings of U.S. Treasuries significantly, but it has not abandoned the dollar. More than half of China’s foreign-exchange reserves remain invested in dollar-denominated assets, including U.S. Treasuries, agency bonds, and U.S. equities. The reduction of Treasury holdings occurred gradually, over several years, and was not large enough to threaten the dollar’s status as the world’s primary reserve currency.
Despite repeated predictions of its demise, the dollar is here to stay.
Reducing Treasury holdings and using the dollar as the primary reserve currency are two separate things. Countries sell Treasuries for reasons that have nothing to do with de-dollarization: defending their own currencies during periods of dollar strength, rebalancing toward higher-yielding assets, responding to rising U.S. interest rates that depressed bond prices, or, in Japan’s specific case, covering domestic liquidity needs as the Bank of Japan tightens policy.
As of December 2025, Japan remained the largest foreign holder of U.S. federal debt at $1.2 trillion, followed by the United Kingdom at $0.9 trillion and China at $0.7 trillion. The Bank of Japan has not dumped U.S. debt, and the composition of Japan’s foreign-exchange reserves has not changed appreciably.
Globally, the value of U.S. Treasuries held by foreign investors is increasing, not decreasing, which directly contradicts the “dumping the dollar” narrative. Foreign investors collectively added $587 billion in Treasuries during the twelve months ending in February 2026, bringing total foreign holdings to a record $9.49 trillion.
That record is the latest point in a sustained upward trend. Total foreign holdings stood at $7.7 trillion in December 2021. They declined in 2022 as rising U.S. interest rates depressed bond prices, but rebounded strongly in 2023, 2024, and 2025, reaching $9.2 trillion by December 2025, an increase of $1.5 trillion in four years.
The 2022 decline, the only year in which foreign holdings contracted, reflected valuation losses caused by interest-rate movements rather than a deliberate effort by foreign investors to divest from U.S. Treasuries or the dollar.
The headline seller was not the Japanese central bank or government but Norinchukin Bank, Japan’s agricultural cooperative bank, which planned to sell roughly 10 trillion yen ($63 billion) in U.S. and European sovereign bonds to stem losses from wrong-way bets on interest rates, with its net loss for the fiscal year tripling to 1.5 trillion yen from a prior estimate of 500 billion yen.
Foreign government bonds had previously made up around 50 to 60 percent of its approximately $315 billion in market assets as the bank sought higher returns during Japan’s years of ultra-low interest rates. In the nine months ended December 2024, it sold 12.8 trillion yen of low-yielding assets, mostly U.S. and European government bonds.
Sony Life Insurance similarly indicated plans to divest some bond holdings to guard against further valuation declines, reflecting a broader pivot among institutional investors reconfiguring fixed-income exposures amid expectations of a prolonged higher-rate environment, selling to cut losses, not because they rejected the dollar.
As the Bank of Japan has raised domestic rates, Japanese institutional investors are now finding JGBs attractive for the first time in decades, pulling capital home, not signaling distrust of the dollar. Norinchukin’s new CEO stated directly that JGBs now count as a natural investment target over the medium and long term: “We could scarcely invest in Japanese government bonds when interest rates were negative and low, but now interest rates are higher, they naturally count as among our investment targets.”
Asahi Mutual Life Insurance similarly diverted 2025 outlay to domestic notes from foreign bonds as Japan’s rising rates reached attractive levels, raising JGB exposure by ¥50 billion in the current fiscal year. March 2026 saw the largest monthly inflow ever into Japanese sovereign bond funds. Japan’s Treasury sales are the function of a private-sector interest rate arbitrage strategy. Institutions that bought low-yield Treasuries when Japanese rates were near zero are now cutting losses and rotating into domestic assets as the Bank of Japan raises rates.
China’s holdings have declined more than 10 percent since the beginning of 2025, as part of a continued diversification of forex reserves toward gold and overseas equity investments. China’s gold reserves stood at 74.15 million ounces at the end of December 2025, marking the 14th consecutive monthly increase. Even so, China still holds $683 billion in U.S. Treasuries and remains the third-largest foreign holder. Much of the reported sell-off also reflected falling bond prices. Foreign investors logged a $142.1 billion valuation loss on long-term Treasury holdings in March alone, meaning nominal declines in holdings partly reflect mark-to-market losses, not deliberate divestment.
The big fall in the dollar share of China’s reserves, from 79 to 59 percent, occurred between 2005 and 2012, a period during which China’s actual dollar holdings continued to rise as total reserves expanded from $800 billion to over $3 trillion. Going underweight the dollar means losing yield, and there is no evidence China has found a credible alternative to anchor its reserve system.
Turkey’s sales are a different case entirely. Turkey offloaded almost all of its U.S. Treasuries in March, with holdings falling to $1.8 billion from $16 billion the previous month, as it stepped up efforts to defend the lira amid intense economic pressure from soaring energy costs. Selling dollar-denominated assets to buy lira is the opposite of de-dollarization.
It reflects the lira’s structural dependence on the dollar. Turkey’s position was also negligible in global terms: a decade ago the country held nearly $80 billion in U.S. government debt before a prolonged reduction; the March 2026 liquidation of $14 billion from a $9.49 trillion market is a currency-defense emergency, not a geopolitical signal.
The dollar’s reserve currency status is not under threat from any of this. The dollar remains the dominant reserve currency, with dollar-denominated securities composing approximately 57% of global foreign exchange reserves as of Q3 2025, according to the IMF COFER dataset; the euro is a distant second at about 20%, the yen at roughly 6%, and the Chinese renminbi at about 2%.
Crucially, when the dollar’s reserve share declined in Q2 2025, 92% of that decrease was driven by exchange-rate effects rather than active central-bank reallocation. Adjusted for constant exchange rates, the dollar’s share fell by just 0.12%. Despite repeated predictions of de-dollarization, no currency is on track to replace the dollar as the world’s primary reserve and trade currency.
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