Bad money decisions are coming home to roost for the US and Japan

US Treasury Secretary Scott Bessent’s attempt to manipulate the market with a US$6 billion buy-back was a miscalculation. The 10-year US Treasury yield hitting 5.04 percent shows the market’s disregard for such a modest intervention. The US government’s plan to borrow US$2.1 trillion this year dwarfs any buy-back effort. Physical oil prices will rise, with a widening gap between paper and physical costs.

Asia’s energy importers, like South Korea and Japan, face increased costs from higher physical oil prices. This will pressure manufacturing sectors that rely on stable energy inputs. Japan’s yen continues to weaken despite intervention, which will further strain import costs for Japanese companies. The Bank of Japan’s policy will remain under pressure to address imported inflation.

The test for Asian central banks is how they manage imported inflation without stifling growth. Watch whether the yen falls below 160 per dollar, which would signal a new level of currency instability. Any further tightening of the Strait of Hormuz will directly impact Asian supply chains and energy security.