I'm monitoring the developments with the Japanese yen and oil — and I see a rather dangerous scenario unfolding. When cheap credit in Japan allowed investors to buy yen and flood trillions into American assets, it seemed like a risk-free scheme. But now, as oil prices rise and reserves dwindle, this carry trade is starting to reverse.

The fact is, Japan imports 95% of its oil through the Strait of Hormuz, and its strategic reserves are only enough for about two months. Europe is in a similar situation — less than 100 days of oil and LNG. If oil prices hit critical levels, investors will be forced to hurriedly close their positions: sell American assets, buy yen, and pay off loans. This will trigger a wave of sell-offs in global markets.

The consequences for dollar inflation will be serious. Each spike in oil prices by $10 adds roughly 0.2-0.3% to inflation and reduces GDP. If gasoline rises above $5, it squeezes consumer spending. There’s a risk of stagflation: economic growth slows, prices continue to rise, and the Fed finds itself in a trap — unable to cut rates when dollar inflation remains high.

In this scenario, the dollar is in a conflicting position. On one hand, it can rise as a safe haven. On the other hand, a reversal of the carry trade will boost yields on American bonds, exposing an economy already hurt by tariffs and instability. The Fed may be forced to print money to finance and rescue the financial system.

In such an environment, crypto assets start to look interesting — not as a salvation, but as a hedge against fiat volatility. Some are looking at solutions for cross-border payments that operate independently of traditional currency systems. This is not investment advice, just an observation of how markets seek alternatives during liquidity crises.

Watch the yen/oil pair and reserve dynamics. If the scenario begins to unfold, it could be one of the key macroeconomic events in the coming months. Diversification and caution are now the main priorities.