The Duran Podcast - Japan's Yen Crisis: Why Bessent Is Secretly Propping Up the Dollar System

Episode Date: August 4, 2026

Japan's Yen Crisis: Why Bessent Is Secretly Propping Up the Dollar System

All right, Alexander, let's talk about what is happening in Japan with the yen. The U.S. Central Bank, Bessent, and the Trump administration, they appear to be working with the Japanese Central Bank. Interesting development. Very interesting development. Now, the thing to understand about what has been going on and why they've done this is because we have been seeing, we have been witnessing over the last few weeks a decline in the value of the yen. The yen has been falling on international markets. And the Bank of Japan,

in order to support the yen, has been selling treasuries, U.S. treasuries, of which it has the world's biggest stockpile, by the way. Now, the United States, especially at this time, does not want countries to start selling treasuries, because it doesn't want to issue more and more treasuries, and it doesn't want too much of a market in treasuries, because as we know, US debt levels are very high, and US debt payments are increasing. So in order to stop Japan buying, selling treasuries, the US intervened to help the Japanese central bank support the yen. And in order also not to weaken the dollar itself by spending dollars buying yen, spending dollars that the United States has to buy yen, what the US has been doing is,

it's been selling from its stop bomb of euro assets. So they've been selling, in effect, euros to buy yen. A very interesting maneuver. The kind of maneuver that Scott Besson, who is, of course, the U.S. Treasury Secretary, is a master of. But the ultimate purpose of it is to prevent a big, sale of treasuries and at the same time just not to weaken the dollar.

Is this going to work, you think? What's got best and best and best and most talented people in this area because this is exactly what he used to do. He used to work for Soros a lot of ago. I mean, it's what he made his name in. So he understands this very well. well, but there's fundamental problems that are piling up. Why is the yen weakening? Well, Japan has a huge debt stockpile, but it's been able to keep previously functioning with very, very high

debt levels because it runs a big trade surplus with the rest of the world. And that means that Japan has had overall a fairly stable current account. And that has meant that investors have not been too worried, including domestic investors, have not been too worried about Japan and about the state of the yen. And recently, there's been significant currency issue in Japan. one of the reasons is because of rises in energy prices, which is weakening Japan's current account deficit and which is obliging Japan to take action to support the yen. What Japan has been doing up to now instead, what has been happening with the yen instead, is that because the Japanese keep their interest rates low, and because,

the yen has been, you know, overall fairly strong. People have been using yen to buy treasuries. It's a critical part of the carry trade in supporting the dollar and the dollar system that has been developing over the last 10 years. So that is starting to break down. It's started to look weaker and what Bessent is trying to do is he's trying to give emergency treatment to sustain this. Now, probably he can do it for quite a long time, but if the underlying problems continue as they are, if energy prices remain high, for example, or continue to go higher, then the The pressures on the yen will probably resume, and this will become an increasingly difficult and expensive maneuver to maintain.

You can see why this time round, high energy prices are not, as they historically have done, strengthening the dollar, they are potentially weakening it. How is this connected to Iran? The energy crisis, the energy shortage, straight of Hormuz. Yeah, I think it is ultimately linked to Iran and it's going to increase pressure on the United States because what you're starting to see are these problems starting to appear

in the global financial architecture, of which the yen is part. So it's going to put more pressure on the administration, on Trump, to find a solution to the solution to the system. straight of hormones problem, which we've talked about many times. And so far, they've not come up with a solution. And with every week and month that passes, those problems are going to grow. Now, I don't know what the United States can do, but this is this problem, I mean, in my opinion that we're seeing with the yen, is a direct result of higher energy prices. Japan is entire dependent on imports of energy. It basically is not an energy producer to any significant

degree. Are they not importing from Russia? Well, they are importing from Russia as it happens. Haven't they broken away a bit from the sanctions? They have indeed broken away a bit. I mean, they were never very enthusiastic about the energy sanctions on Russia altogether. So they still import oil and natural gas from Sechalin, for example, in which they have been invested. And I personally would not be surprised. If the stresses grow, they begin to buy more and more.

Perhaps they're doing it already. They're doing it perhaps on the quiet. Now, you know, as we know happens, the Russians, according to a report in today's financial times, are increasing their fleet for transporting. LNG, that looking increasingly for customers in Asia, why wouldn't one of those customers be Japan? Yeah. Makes complete sense.

Yeah. Final question with Hormuz, we do seem to have an agreement in place, or we're approaching a final agreement between Iran and Oman. According to the New York Times, the agreement is that Iran will ultimately have control of the Strait of Hormuz, but it has agreed with Oman that the ships entering the strait will be monitored by Iran. The ships exiting the strait will be able to use a southern route closer to Oman with the approval of Iran, and there will be a fee that will be shared. What do you make of that agreement and will the United States accept that agreement? Trump has put a deadline of

this week, I believe, Tuesday or Wednesday is Trump's deadline. As far as this power, this Hormuz sharing deal, let's call it, between Oman and Iran. Yes, I should say that there are some reports also in the media here that are denying that this agreement is indeed moving forward in the way that's been suggested. So, you know, we have always this problem with these negotiations that some people are saying that progress is made, others are saying that, in fact, there's been no progress. But let's assume there has been progress.

It is very like what you suggested in that video we did when we were both in the United States in Chattanooga, that the United States accept the Iranian toll, the Iranian fee for ships to pass through the strait of Hormuz. Now, I think that the political difficulties for Trump to do that will remain as great as ever and as big as what we discussed in our program. So I think that the inclination of many people and of Trump itself will be to reject this proposal. But with every day the passes, with the stresses growing, and we see the stress is growing in the financial system.

Perhaps the pressures eventually will force the Trump administration to go, to finally accept what looks like the only way to end this problem. In other words, to accept the Iranian fee. And the one thing Donald Trump, it seems to me, has always understood or this has always been fearful of is disruption and major falls in international money markets. And I think if Besson comes along to him and tells him, unless we do this, we're going to see a major crisis in the dollar and a collapse in the treasurer's market. I think even Trump will take notice then. All right.

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