China's holdings of U.S. Treasuries have risen about $95 billion since the end of January, but are still almost $100 billion lower than they were last summer. Japan's holdings slipped $20.5 billion to $1.09 trillion.
Tuesday's report from the US Treasury Department also signaled that China has steadily ratcheted up its accumulation of US government debt as it has burned far less of its foreign exchange reserves this year to defend the yuan currency.
China was dumping U.S. Treasuries in 2016 so that it could buy its own currency - the yuan - to counter downward pressure caused by a huge outflow of cash from its economy.
Japan had been the largest US debt holder since October past year when it outpaced China. "They may have reshuffled their portfolio a little bit and sold a few things".
China reduced its Treasury securities holdings sharply in October and November past year as it conducted dollar-selling, yuan-buying interventions to shore up the value of the Chinese currency, also known as the renminbi.
China is now the largest foreign holder of US treasuries with its holdings reaching US$1.14
Japan's holdings have fluctuated in recent months. The Chinese currency has gained nearly 4% against the dollar so far this year. Japan held $1.091 trillion in USA government debt in June, down from $1.111 trillion in May. It is also expected that China's USA holding would continue to rise in future months.
China has once again become the United States' largest creditor, Treasury Department figures released Wednesday indicate.
From the data, the rest of the top five U.S. creditors by the end of June are Ireland, Brazil and Cayman Islands holding $302.5 billion, $269.7 billion and $254 billion respectively.
China may have been biding its time to see how government gridlock would play out before making its next room.