Citibank: U.S.-Japan investment fund may prompt Japan to use its holdings of U.S. bonds, giving rise to a mini-version of the Mar-a-Lago estate agreement.

Citigroup analysts pointed out that as part of the tariff agreement between Japan and the United States, the $550 billion investment fund may heavily utilize Japan's $1.3 trillion foreign exchange reserves. US Treasury bonds are a core component of Japan's foreign exchange reserves, and Citigroup analysts believe that Japan's use of these bonds may trigger a chain reaction, leading to an increase in long-term US bond yields. This in turn may prompt the US to pressure Japan to extend the maturity of the US bonds it holds. "We do not expect a major shift in multilateral exchange rate policy that would result in a 'Plaza Accord-like agreement,' but there is a possibility of reaching some kind of bilateral 'mini-Plaza Accord,'" Citigroup analysts Osamu Takashima and others pointed out in their report. "From the perspective of exchange rate policy, we believe that the trend will continue to lean towards a weak US dollar and a strong Japanese yen."