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China and Japan, the biggest foreign creditors of the US, together hold more than $2.4 trillion in US Treasury bonds. As of July 31, China held $1.28 trillion while Japan held $1.14 trillion, according to Treasury Department data.
The political standoff, which closed much of the US federal government, entered its second week after Republicans in the House of Representatives refused to increase the $16.7 trillion debt ceiling as they seek changes in President Barack Obama’s signature healthcare law.
The US Treasury said it would hit the debt ceiling by October 17, at which time it would have only around $30 billion in incoming revenues to pay the government’s bills, leaving the nation on the edge of default, Reuters reports.
For Japan, the current paralysis in Washington could also diminish US presence in the Asia-Pacific region amid China’s rise and aggressiveness in claiming contested territories.
Days after the two nations agreed to reinforce their defense alliance, the US was forced to cancel a joint military exercise amid the fiscal standoff.
“This is the only case that has been affected but if cancellations continue on other events, the impact would be substantial,” a spokesman for Japan’s Defence Ministry said.
By Maesie Bertumen
Image from the Lincoln Memorial in Washington, DC: Rich Renomeron/Flickr