Japan Isn't Making a Long-Term Investment

... when they buy our Treasuries. Dig this:

Japan is poised to pass China as the largest U.S. creditor for the first time since August 2008 as growing demand for U.S. government debt reduces borrowing costs for President Barack Obama as the deficit swells.

Japan added $55.3 billion of Treasuries this year, swelling its holdings 7.2 percent to $821 billion, Treasury data show. China, which overtook Japan in September 2008, cut its stake by $48.1 billion, or 5.4 percent, to $846.7 billion. Japan made its biggest purchase in 10 months in July, just after China cut its position by the most on record.

Japan has an absolutely monstrous debt problem of their own, with more than 200% of GDP in debt. For 20 years, they've been following the Paul Krugman / Barack Obama school of economics with one giant borrowed stimulus program after another. They've got nothing to show for it except for debt that's going to have to be serviced somehow. When they buy US bonds, they aren't doing it for the long haul. Right now, they're doing it because their own interest rates are so horrible.

For investors in Japan coping with record low yields, U.S. debt is relatively cheap. Ten-year Treasuries yield 1.50 percentage points more than similar-maturity Japanese government bonds, up from 0.82 percentage point in December 2008. Satoshi Okumoto, a general manager in Tokyo at Fukoku Mutual Life Insurance Co., said he bought Treasuries last quarter.

“Treasuries are quite attractive, especially from the view of Japanese investors, because there still is a yield,” said Okumoto, whose firm has the equivalent of $66.4 billion in assets. “Money is flowing into U.S. bonds from Japan.”

That flow is going to reverse at some time in the future as the Japanese will have to sell foreign bonds to service their own debts.

Unless they just print Yen.