Bessent Furious As Japan’s BOLD Sell-Off Triggers U.S. Financial Panic

Added: 2026-05-18

[00:00:00]Scott Bessent is not going to Japan just for diplomacy. He is going because one of America's closest allies may be forced to sell more US bonds right after Trump meets Xi Jinping. That is the real problem Washington is facing. The war has now dragged on for more than 70 days and the disruption to global energy supply is becoming too large to ignore.

[00:00:23]The world is facing the risk of losing 10 to 15 million barrels a day. That kind of shock does not hit every country the same way. China is in a stronger position because it still has Russian supplies coming from the north. Many US allies are in a much harder position because they still have to play by Washington's rule book. They face higher energy costs, higher import bills, and more pressure on their currencies. This is why Bessent's travel route matters.

[00:00:51]Before the major meeting with China, he is making stops in Korea and especially Japan. And in Japan, he is expected to meet not only the Prime Minister, but also the Finance Minister and the head of Japan's Central Bank. That tells us where the pressure is building. Japan is not just another ally. Japan is one of the key pillars of the dollar system. It holds around 1.2 trillion dollars in US bonds and another 161 billion dollars in deposits. If Japan starts selling dollar assets to protect itself, the crisis moves beyond oil. It becomes a bond market problem. It becomes a dollar problem. It becomes a China summit problem. Bessent wants to arrive in Beijing with leverage. First, he has to make sure Japan does not weaken the financial system Washington depends on.

[00:01:43]That is why the yen has become such a sensitive issue. Japan's inflation problem is becoming harder to contain.

[00:01:50]The country depends heavily on imported energy and imported food. So, every jump in oil prices quickly moves into the real economy. The US cannot guarantee that this will end tomorrow or even next year because Washington controls only one side of the war. If Iran refuses to accept US terms, the conflict continues.

[00:02:11]If the conflict continues, energy prices stay high. And if energy prices stay high, Japan's import bill keeps rising.

[00:02:18]That is why the yen has become such a sensitive issue. A weaker yen makes imported oil, gas, food, and raw materials even more expensive. So, Tokyo has to defend the currency before the pressure spreads deeper into households and companies. In the first week of May, Japan spent around $35 billion to defend the yen. Tokyo sold dollars in the open market and bought back yen to prevent a deeper currency collapse. According to Fed data, Japan's holdings of US Treasuries declined by 8.7 billion dollars in the first week of May. Fed data also showed Japan selling off nearly 55 billion dollars in US dollars to save the yen.

[00:02:59]That means Japan was drawing on dollar reserves. And this creates a direct problem for Washington. When Tokyo sells dollars directly, the dollar comes under pressure. When Tokyo sells US bonds first and then converts the proceeds into yen, both Treasuries and the dollar take the hit. Bond prices weaken, yields can rise, and the currency still faces selling pressure. This is exactly the kind of chain reaction Bessant wants to stop as Trump sits down with Xi Jinping.

[00:03:28]Goldman estimated that Japan still has enough firepower for around 30 more interventions. That number matters because it shows the scale of the risk.

[00:03:38]If the yen keeps falling, Japan can keep defending it. And if Japan keeps defending it, Tokyo may keep selling dollar assets. For Bessant, the nightmare is that Japan may have both the capacity and the need to do it again and again. And that need depends heavily on what happens in the Gulf, where the standoff with Iran is still keeping energy markets under strain.

[00:04:02]Trump's anger at Iran matters because it shows Washington is not preparing to step back. Iran's response to the US peace plan was called totally unacceptable, and Trump's reaction made the situation look even more rigid. He even returned to the Obama-era story about the $1.7 billion transferred back to Iran, although that was tied to a failed arms deal and was a separate issue. The point is that Trump is using the moment to harden the political line.

[00:04:31]Iran's message also leaves very little room for compromise. Its top demands go straight against the US position in the Gulf. Iran wants the Strait of Hormuz to be free of US influence. It says foreign powers are unwelcome in the Persian Gulf. It also describes the US military presence as the main source of instability in the region. That message is clear. Iran wants US power out of the Gulf, and it wants control over the strait.

[00:04:58]For Washington, accepting that would look like a major retreat, especially during the ongoing summit with Xi Jinping. So, the standoff continues, and the pressure on energy markets stays alive. Even the US energy secretary could not present the situation as fully under control.

[00:05:15]Uh we we are today we are controlling no flow of Iranian ships. We have escorted out several American ships, and if need be, if we don't get to a deal with Iran, we will we will use military force to open the strait to everyone. Today Today traffic through the Straits of Hormuz is challenged. So, Chris Wright admits that traffic through the Strait of Hormuz is challenged. He says the US has escorted several American ships. He also says Washington may use military force to open the strait to everyone if there is no deal with Iran. For Japan, this is not a theoretical risk. It is a live energy corridor problem. The world is still facing the danger of losing 10 to 15 million barrels a day.

[00:05:59]That means higher oil, higher import costs, a weaker yen, and another round of currency intervention waiting around the corner. The danger becomes even clearer when we look at global oil inventories. Existing buffers are being burned through at record speed.

[00:06:14]According to the original calculation, inventories are being drawn down from around 8.5 billion barrels, and markets are moving closer to levels where the energy system becomes harder to manage.

[00:06:26]The problem is that not every barrel can be used safely. Oil inventories are not just numbers on a chart. They keep pipelines, ports, tankers, and refineries running. Once inventories fall below certain levels, the energy system becomes harder to manage.

[00:06:42]Refineries need stable supply. Pipelines need enough flow. Importers need enough storage to handle delays and shocks. By June, inventories could reach an operational stress level of around 7.6 billion barrels. By September, they could hit 6.8 billion barrels, which is described as the operational floor.

[00:07:03]In simple terms, the world may have another two to four months before the pressure becomes much more serious. For Japan, that means another two to four months of expensive energy imports, pressure on the yen, and possible currency defense. Every extra month of high oil prices makes Japan's import bill harder to carry.

[00:07:23]Every extra month of yen weakness raises the cost of food, fuel, and raw materials. And every new intervention raises the risk of more dollar asset selling. The same pressure is also reaching the United States. Trump's own oil reserves are falling quickly. The The Strategic Petroleum Reserve is around 392 million barrels today. This covers at most around 60 days of oil imports. The US is expected to drain a total of 172 million barrels over 120 days, which could push the final level below 300 million barrels. If the crisis gets worse, America could become a more aggressive oil importer while competing with everyone else for supply. And if gasoline prices rise fast enough, Trump may have to reduce US energy exports to protect the domestic economy. That would push every ally to focus on survival first. Bessant wants to arrive in Beijing with strength because Trump needs a result from the summit with Xi Jinping. Washington wants China to invest more in the US. Trump also wants China to buy more American energy, more American food exports, especially soybeans, and more Boeing airplanes.

[00:08:34]These are the same pressure points Washington has used before, only this time the financial background is much weaker. Japan is already defending the yen. Japan's Treasury holdings have already dropped by 8.7 billion dollars.

[00:08:47]Fed data also shows nearly 55 billion in dollar selling, and Goldman's calculation shows Japan still has enough firepower for around 30 more interventions. That creates a serious problem before the summit. If Japan keeps defending the yen, it may keep selling dollar assets. If that selling continues, the pressure moves into the US bond market and the dollar. This is exactly what China can see before Trump even enters the room. The energy picture makes it harder. Global oil inventories could reach the stress level by June and the operational floor by September. At the same time, the US reserve could fall from around 392 million barrels to below 300 million barrels after the planned drawdown. That means Washington is also facing pressure from the oil market.

[00:09:37]Then, there is the political pressure inside the United States. 58% [snorts] of registered voters disapprove of Trump's handling of inflation and the cost of living. 55% disapprove of Trump's tariffs. Prices are already hurting households. Coffee is up 18%.

[00:09:54]Beef is up 17%. Vegetables are up 5.5%.

[00:09:58]These increases came before the full war impact reached the economy. With higher energy prices and a global fertilizer crisis building, food prices could rise by double digits in coming quarters.

[00:10:11]China can see all of this at once. The bond market pressure, the yen crisis, the oil shock, voter anger, and inflation.

[00:10:19]That makes Trump's demands much harder to sell in Beijing. This is where the whole story becomes bigger than Japan, oil, or one summit. The pressure on the dollar system is now coming from inside America's own alliance network. Japan is not trying to attack the dollar. Tokyo is trying to protect its currency, its import system, and its domestic economy.

[00:10:41]If the yen keeps falling, Japan has to defend it. If energy prices keep rising, Japan has to protect the cost of oil, gas, food, and raw materials. If inflation keeps climbing, Japan's government has to act before the damage spreads deeper into households and companies. And if that means selling more dollar reserves or more US bonds, then Washington has a serious problem.

[00:11:06]That is why Bessant's trip to Japan matters so much. It looks like a diplomatic visit, but it also signals that Washington is worried about what its own allies may do while Trump is meeting with Xi Jinping or immediately after the summit. The dollar system is strongest when allies keep buying and holding US assets. If a crisis forces those same allies to sell, America's financial power starts weakening from inside the system it built. China can use this during the summit. Beijing does not need to make a big threat. It can simply watch the market. Japan is selling. Oil is rising. US reserves are falling. Voters are angry. Food inflation is building. And Bessant has to convince allies not to dump bonds.

[00:11:51]That gives Trump far less leverage than he wants to project. The meeting starts before anyone enters the room because the market is already showing where Washington is vulnerable. The real test now is whether Bessant can keep Japan aligned if the yen comes under another wave of selling. If Tokyo is forced to intervene again, the signal to the market will be clear. Even America's closest allies are preparing to protect themselves first, and that is exactly the kind of weakness China can read without saying a word. So, what do you think? Can Bessant stop Japan from selling more US bonds? And will China use this weakness during the Trump-Xi summit? Let me know in the comments below, and don't forget to hit the like and share the video. Thanks.