China, Japan Reduced Holdings of U.S. Treasury Debt in January

China and Japan, the two biggest foreign holders of Treasuries, reduced their positions of U.S. government debt in January as a measure of demand for American financial assets fell to a six-month low.

China has been a net seller of Treasuries for three straight months, the longest such stretch since the end of 2007. Chinese officials have questioned the dollar’s role as a reserve currency and recently sought assurances about the safety of U.S. government debt as the budget deficit widens to a projected record $1.6 trillion this year.

“Foreign central banks stopped buying Treasuries in January,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “If this were to continue, if China were to stop recycling its dollars into U.S. Treasuries, it could have dire implications for Main Street America in that mortgage rates could move higher.”

Russia’s Treasury holdings in January fell by a net $17.6 billion to $124.2 billion, the lowest level in a year, the report showed. Total foreign purchases of Treasury notes and bonds were $61.4 billion in January compared with purchases of $69.9 billion in December.