The U.S. and China confronting each other over some islands would move the markets dramatically regardless of how China decides to allocate their foreign curren

The U.S. and China confronting each other over some islands would move the markets dramatically regardless of how China decides to allocate their foreign currency reserves. I don't think there's any evidence that U.S. strategic planners consider the economic impact of defending the interests of our allies (particularly one as critical as Japan) as more significant than a third or fourth order effect. And as I alluded to: If China's 8% is so influential on our strategic actions, why isn't Japan's 7% almost equally so? It's not as if the Japanese government couldn't pick up the slack if China started reducing its position in T-bills. There's likely no reason for them to, because unlike you, I don't believe foreign bond holdings represent any kind of serious lever in international relations.