Not daring to resist the United States, Japan is planning to challenge the world alone, and is not far from losing its country.

The yen has collapsed again, with the exchange rate against the US dollar soaring back to 160. As a shadow currency of the dollar, the yen’s devaluation not only impacts the entire Japanese economy but is also closely linked to dollar-denominated assets.

This is not the first time the yen has crashed; in 2024, when the yen depreciated, the Bank of Japan spent hundreds of billions of dollars, only to gain a brief respite.

And this time, Japan surprisingly plans to mobilize the entire nation to stabilize the yen by shorting crude oil. What kind of impact will this have on Japan’s economy and financial system? If it fails, is Japan really not far from losing its country?

Japan Plans to Take on the World Alone

In response to the sharp decline of the yen, Japan’s Finance Minister recently stated that to save the yen’s exchange rate, they intend to use foreign exchange reserves to short crude oil futures on the international market to stabilize the yen. She believes this is a way to reduce genuine dollar demand in the primary market.

This approach would cause the dollar to weaken relative to the yen, making the yen stronger.

The reason they dare not directly sell dollars to stabilize the yen is that the current Sanae Takai government is too afraid to defy the strong stance and orders from the United States.

In 2024, when the yen weakens, the Bank of Japan will not only sell US Treasuries but also raise interest rates to stabilize the exchange rate.

However, such actions have faced strong opposition from the US side. Therefore, under the leadership of Prime Minister Sanae Takai, the Japanese government can only hurriedly respond to US concerns, thinking along US lines—helping the dollar resolve its problems, and the yen crisis will naturally be alleviated.

The fundamental reason for the current weakness of the dollar is that, under the US-Iran conflict, everyone is selling risk assets, causing a severe shortage of dollars in the currency market and creating a liquidity crisis.

Therefore, from Japan’s perspective, as long as crude oil prices are brought down, all problems will be solved.

This logical deduction is fundamentally sound, but the actual results of implementing it could be far more complicated than Japan losing its last thirty years of economic growth.

Mobilizing massive foreign exchange reserves to short crude oil in the international futures market involves risks far greater than those associated with the yen itself, and the consequences of failure could be even more severe.

When chaos erupts in the Middle East, oil prices soar, and the first reaction of global traders is “buy dollars, buy crude oil”—a deeply ingrained reflex.

Japan’s attempt to use financial derivatives to suppress the “war premium” and even “sentiment premium” caused by geopolitical conflicts and physical scarcity is akin to trying to extinguish a volcano with a fire hose.

It’s fundamentally on a different level.

Furthermore, what is the scale of the global crude oil market? It’s a massive market with daily trading volumes in the hundreds of billions of dollars.

Japan’s foreign exchange reserves are indeed substantial, but investing a few hundred billion or even a few trillion yen might only change a couple of candlesticks on a chart—like throwing a few stones into the ocean, creating some ripples but unable to alter the trend.

Even more frightening is that if Japan actually shorts heavily, and oil prices rise instead of falling amid complex geopolitical tensions, the Bank of Japan could shift from being a “market savior” to a “hunted prey” by international speculators, facing brutal short squeezes and losing even more dollar reserves.

Ultimately, whether Japan’s “bold plan” succeeds has already gone beyond ordinary financial operations and turned into a high-stakes gamble about national destiny and monetary sovereignty.

Its absurdity reflects, precisely, the deep-seated helplessness of non-core currency countries under the cycle of dollar hegemony.

The People’s Daily has repeatedly pointed out in analyzing the global economic landscape that the Federal Reserve’s monetary policy has strong spillover effects, often posing severe challenges to other economies.

Japan is currently the most typical “under pressure” country.

The core of this yen depreciation is the divergence in monetary policies between Japan and the US—one hesitant to raise interest rates for fear of stimulating the economy, the other aggressively tightening to combat inflation.

As the interest rate gap widens, capital naturally flows from Japan to the US, like water flowing downhill.

Against this backdrop, whether through traditional yen-buying interventions or the fanciful idea of shorting crude oil, Japan is fighting against the tidal force of the dollar.

When risks truly materialize, it becomes clear that Japan has no right to choose to stay ashore.

Japan’s predicament offers a lesson to all economies dependent on external markets and with incomplete monetary sovereignty.

When your economic lifeline is in others’ hands, your financial markets rely on their liquidity, and your monetary policy must heed their signals, so-called economic independence is like a castle on the sand—appearing solid but vulnerable to a big storm.

Once a country reaches this point, it is truly not far from losing its sovereignty altogether.

Author’s note: These are personal opinions and for reference only.