the difference between china and japan is that despite the fact that both countries have huge amounts of USTs, built up from decades of surpluses with the US and other countries transacting in USDs, is that in china most of the USTs are held by the central bank while in japan they are mostly held by retail investors.
although large asset managers could hypothetically take control of the holdings of their clients and dump them in order to raise USD liquidity to stave off issues with the yen, this would be blatantly anti capitalistic at a time when japan needs a new trade deal with the US to secure their trade surplus as they muddle their way through a rice shortage.
in china, the story is much different. since the bonds are held by the PBOC and the Chinese Ministry of Finance, they can be used in a form of economic warfare, if the Chinese want to employ the nuclear option and fire sell their $1T+ of treasuries and cause rates to go parabolic within days
but, it's unlikely they will exercise this option, given the damage that it will cause to the domestic Chinese economy as the CCP is dealing with the fallout from the collapsing housing market and the subsequent unwinding of the shadow banking system.
quote below via Weston Nakamura
