Japan eclipsed China in June as the top foreign holder of U.S. Treasurys, increasing its holdings to $1.123 trillion from $1.101 trillion in the prior month, latest data from the U.S. Treasury Department showed.

China boosted its holdings to $1.113 trillion from $1.110 trillion in May following three straight months of decline.

China's holdings of U.S. government debt have been under closer scrutiny as speculation remains that it could dump Treasurys as a weapon in its trade conflict with the U.S., which has officially labeled the country a currency manipulator.

"The U.S. believes, in a geopolitical point of view, it's being contained by China with China's holding of its sovereign bonds," Chen Yuan, former deputy governor of the People's Bank of China, said Aug. 10, according to Bloomberg News. "That means the U.S. is not completely without weakness."

In June, net foreign purchases of long-term securities were $99.1 billion, taking into account transactions in both foreign and U.S. securities. That followed an upwardly revised inflow of $4.6 billion in May.