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The United States has officially ruled out supporting any intervention to prop up the weakening Japanese yen, according to a definitive statement from Treasury Secretary Scott Bessent. As Japan faces growing pressure to defend its currency against a surging dollar, this hands-off approach from the U.S. means Tokyo may have to act alone.

Bessent’s remarks confirm that the U.S. will not participate in coordinated actions to stabilize the yen, committing instead to a policy of market-determined exchange rates.

Why the US Is Staying Hands-Off on the Yen

At a press briefing, Treasury Secretary Bessent underscored the core principle of American financial policy: supporting freely traded exchange rates. He stated that any move to artificially adjust currency values is inconsistent with this long-standing approach.

"We believe markets should set exchange rates," Bessent said, clarifying that the administration does not view the yen's current slide as a crisis requiring international intervention. This stance aligns with the U.S. policy of avoiding direct currency manipulation except in rare and extreme situations.

Impact on Japan and Global Markets

With the United States stepping back, the pressure now shifts entirely to Japan. The decision creates several significant implications for the Bank of Japan and the wider financial world.

• Potential for Unilateral Action: Japan may now be forced to act unilaterally to stop the yen's decline. However, without U.S. backing, such an intervention could have a limited impact and may even risk triggering further volatility in currency markets.

• Signal of Continued Dollar Strength: For investors, the U.S. position can be interpreted as a signal of continued dollar strength. A strong dollar often exerts downward pressure on risk-sensitive assets, including Bitcoin and other digital currencies.

• Broader Macro Uncertainty: The development highlights the ongoing geopolitical and macroeconomic uncertainties that continue to shape global markets.

Ultimately, the path forward for the yen now depends entirely on Japan's next move. With the U.S. firmly on the sidelines, the decisions made in Tokyo will have significant ripple effects across the global financial system.

Oil prices surged to a four-month high in Asian trading on Thursday, building on recent momentum as multiple factors tightened the market. The rally is being driven by rising geopolitical risk between the United States and Iran, severe supply disruptions from cold weather in the U.S., and a weaker dollar.

During Thursday's session, Brent oil futures for March delivery climbed 0.8% to $68.96 a barrel, while West Texas Intermediate (WTI) crude futures increased 0.9% to $63.75 a barrel.

US-Iran Conflict Fears Add Risk Premium

A key driver behind the price spike is the escalating tension in the Middle East, which has traders pricing in a higher risk premium for crude oil. Markets are increasingly concerned that a potential conflict could disrupt crude output from Iran.

These fears intensified following reports that U.S. President Donald Trump was weighing new military options against Iran, potentially targeting its leadership and nuclear infrastructure. This consideration comes shortly after President Trump publicly urged Iran to abandon its nuclear ambitions and re-engage with the U.S. Tehran rejected these calls and threatened retaliation.

The situation is further strained by the arrival of U.S. ships in the Middle East, with Trump recently stating that another naval group was en route to the region.

Winter Storms and Inventory Draws Tighten US Market

In the United States, domestic supply is being squeezed by extreme weather. A major winter storm has brought heavy snowfall and sub-zero temperatures across large parts of the country, significantly disrupting crude production.

Key impacts of the weather include:

• An estimated 2 million barrels per day of crude production have been taken offline over the past week.

• Oil exports from the Gulf coast have also been disrupted.

This sharp drop in output is expected to tighten U.S. oil supplies, a trend already visible in the latest inventory data. Government figures released Wednesday showed that U.S. crude inventories fell by 2.295 million barrels for the week ending January 23. This draw was far greater than the market expectation of a 0.2 million barrel decline.

A weaker U.S. dollar is also providing support for oil prices. The currency remained under pressure after the Federal Reserve decided to leave interest rates unchanged, as was widely expected.

In an unexpected development, the United States is returning a seized oil tanker to Venezuela, according to two U.S. officials who spoke with Reuters on Wednesday. The move comes after a months-long American campaign to intercept vessels linked to Venezuela's oil trade, which has resulted in seven seizures since late last year.

A crude oil tanker sits docked at Venezuela's Maracaibo Lake, a hub of the nation's oil industry.

The officials, who requested anonymity, identified the vessel as the M/T Sophia, a Panama-flagged supertanker. They did not provide a reason for the decision to return the ship. Neither the U.S. Coast Guard, which leads these interdiction operations, nor the Venezuelan communications ministry responded to requests for comment.

The Seizure of the M/T Sophia

The M/T Sophia was carrying oil when it was intercepted by the U.S. Coast Guard and military forces on January 7. At the time of the seizure, the Trump administration described the tanker as a "stateless, sanctioned dark fleet motor tanker."

One source could not confirm whether the Sophia still contained its oil cargo. Earlier this month, the Sophia and another seized tanker were observed near Puerto Rico.

A Broader US Strategy in Flux

This latest action occurs within the context of President Trump's assertive foreign policy toward Venezuela. The administration initially focused on removing President Nicolas Maduro from power. After diplomatic efforts stalled, Trump ordered a raid on January 3 to capture Maduro and his wife.

Following the raid, the White House announced its intention to control Venezuela's oil resources indefinitely as part of a $100 billion plan to rebuild the nation's struggling oil industry. The return of the M/T Sophia raises questions about the current direction of this strategy.

Risks Posed by the "Shadow Fleet"

Experts have raised alarms about the safety of many tankers linked to Venezuela, which are often part of a "shadow fleet" operating outside of standard regulations. A significant number of these vessels, including many seized by the U.S., were built over 20 years ago.

According to shipping and insurance industry sources, these aging tankers frequently lack proper safety certifications and adequate insurance coverage. This creates substantial risks for global shipping and the environment, as establishing liability for oil spills or collisions becomes nearly impossible.

In a related development, the Dubai-based company GMS has applied for a U.S. license to purchase and scrap ships seized by the American government that were involved in Venezuelan oil trading.

The Philippine economy expanded by 4.4% in 2025, marking its slowest annual growth in five years. The slowdown reflects the combined impact of a high-profile infrastructure corruption scandal and persistent global trade pressures.

Government data released Thursday confirmed that last year's gross domestic product (GDP) growth was the weakest since 2020, when the economy contracted by 9.5% during the COVID-19 pandemic.

Momentum faded toward the end of the year, with GDP expanding just 3.0% in the fourth quarter. This was a decline from the revised 3.9% growth in the previous quarter and the slowest quarterly performance since early 2021.

The full-year result fell short of the 5.5% to 6.5% target set by President Ferdinand Marcos Jr.'s administration and was also below the 4.8% median forecast from economists surveyed by BusinessWorld.

What Dragged Down the Philippine Economy?

Several key factors contributed to the underperformance in the second half of 2025. A major graft scandal involving nationwide flood control projects disrupted public construction and dampened household spending. The economy also faced challenges from multiple typhoons and floods that struck the country throughout the year.

These domestic issues were compounded by external headwinds. The Department of Economy, Planning and Development cited global trade friction, particularly U.S. President Donald Trump's "reciprocal" tariffs, as a key factor.

In response, the government has already adjusted its future expectations. In early January, economic managers revised the 2026 growth target downward from an initial range of 6-7% to a more modest 5-6%.

Analyst Outlook: Not a Crisis, But a Test of Confidence

Despite the missed targets, some experts view the situation as a slowdown rather than a crisis. Robert Dan Roces, an economist at SM Group, noted that the 2025 performance was "not a crisis story."

"Domestic demand and services kept growth intact, yet momentum stayed capped as public investment underperformed," Roces explained. "The main drag came from weak government spending execution, which limited the growth boost from infrastructure."

Looking ahead, Roces sees 2026 as a "confidence and execution test." He suggests that while trade pressures and governance issues may delay public projects, easing financial conditions "give room for a gradual recovery once private investment responds."

Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics, offered a more cautious view. He projects a "trivial improvement in growth" to 5.0% in 2026, arguing that Filipino consumers are "still in no real financial health to provide a material boost."

Chanco highlighted several underlying weaknesses:

• Consumer confidence remains subpar.

• Household debt levels have limited room to expand further.

• Spending intentions are still subdued compared to pre-pandemic levels.

Central Bank Eases Policy as Inflation Cools

A significant drop in inflation provided the central bank with flexibility. The average inflation rate for 2025 slowed to 1.7%, the lowest since 2016.

This cooling price environment allowed Bangko Sentral ng Pilipinas (BSP) to continue its monetary easing cycle, which began in August 2024. In December, the central bank cut its benchmark policy rate by 25 basis points to 4.5% to help stimulate consumption.

"A softer 2025 growth print gives the BSP space to ease policy," Roces said, adding that "any rate cuts will stay cautious and paced, anchored on inflation risks and currency stability."

A snap election called by Prime Minister Sanae Takaichi is sparking fears of a major fiscal policy shift in Japan, sending tremors through global financial markets. Concerns about increased government spending are pushing Japanese government bond yields to new highs and weighing on the yen, raising a critical question: Will Japanese investors start bringing their money home?

The potential for a massive repatriation of capital is forcing global investors to pay close attention.

The Trillion-Dollar Threat of Repatriation

Concerns over Japanese investors selling foreign assets are grounded in the sheer scale of their holdings. For decades, low domestic interest rates drove a hunt for yield abroad, turning Japan into one of the world's largest creditors.

According to Brad Setser, a senior fellow at the Council on Foreign Relations, Japanese investors hold over $2 trillion in foreign long-term bonds, in addition to another $1 trillion in reserves. U.S. data underscores this dominance, showing Japanese residents as the single largest foreign owners of Treasury securities, holding $1.2 trillion as of November.

If Japan's pension funds, insurers, banks, and asset managers were to suddenly dump these assets, the shock could disrupt markets, particularly in the long-dated sovereign debt space where they are major global players.

Figure 1: The yield gap between U.S. and Japanese 10-year government bonds has been narrowing, making domestic debt increasingly attractive to Japanese investors.

Why a Mass Sell-Off Isn't So Simple

Despite the risk, a large-scale rotation out of U.S. Treasuries, German bunds, or UK gilts and into Japanese government bonds (JGBs) faces significant hurdles.

The primary obstacle is the Japanese bond market's limited scale and depth. The Bank of Japan (BOJ) already owns half of all outstanding JGBs, leaving an investable market of about 55 trillion yen ($3.6 trillion). This is just a fraction of the $30 trillion market for U.S. Treasuries.

The BOJ's massive presence also drains liquidity, especially for long-term debt, making prices susceptible to sharp swings. A recent market dislocation index from Bloomberg hit a record high, indicating that yields were suppressed by a tenth of a percentage point due to a lack of liquidity. This inherent volatility poses a risk for any investor moving large sums into JGBs, a danger that could intensify if Takaichi’s Liberal Democratic Party wins the election and implements ambitious spending plans.

Rising Yields Create a Tipping Point

Even with these structural challenges, the appeal of domestic bonds is undeniably growing. Benchmark yields on 10-year and 30-year JGBs have reached 2.2% and 3.6%, respectively, offering newly competitive returns.

This shift is already influencing behavior. Toru Nakashima, CEO of Sumitomo Mitsui Financial Group, Japan's second-largest banking group, told Reuters in December that the company would gradually increase its exposure to local government debt if the 10-year yield rose "a bit further" and stabilized.

Such statements from major institutional leaders are a clear signal that global investors must begin pricing in a steady reduction of Japanese demand for foreign assets, even if the process is gradual.

A Slow Unwinding to Watch

Investors will be looking for more clarity on Tokyo's fiscal strategy after the February 8 election. However, a sudden rush back into the domestic market is unlikely.

"These kinds of investors – especially insurance companies, pension funds – they don't move all at once," notes Prashant Bhayani, Asia chief investment officer at BNP Paribas Wealth Management. "These flows play out over many years."

Recent market activity highlights the tension. On January 28, a strong auction for super-long-term debt caused JGB yields to dip, with the 40-year yield falling to 3.9% and the 10-year to 2.3%. This followed a spike just days earlier on January 20, when the 40-year yield surpassed 4% for the first time since its 2007 debut. That surge was driven by fears that an election win for Takaichi would open the door to tax cuts and further spending for Japan's heavily indebted economy.

Iranian-American journalist, author, and political activist, Masih Alinejad, speaks during a meeting of the United Nations Security Council on Iran at the request of the United States at U.N. headquarters in New York City, U.S., January 15, 2026. REUTERS/Eduardo Munoz

A Brooklyn man was sentenced to 15 years in prison on Wednesday for taking part in what prosecutors called a failed Iran-backed murder-for-hire plot against Masih Alinejad, a prominent Iranian dissident living in the U.S., the Justice Department said.

Carlisle Rivera, also known as "Pop," previously pleaded guilty to one count of conspiracy to commit murder-for-hire and one count of conspiracy to commit stalking before U.S. District Judge Lewis Liman for the Southern District of New York, who imposed Wednesday's sentence, the Justice Department said in a statement.

Alinejad, who fled Iran in 2009, is a longtime critic of Iran's head-covering laws and a journalist. She has promoted videos of women violating those laws to her millions of social media followers. She was living in Brooklyn at the time of the alleged plot on her life.

The case was part of a crackdown by the Justice Department on what it calls transnational repression: the targeting by authoritarian governments of political opponents on foreign soil.

Prosecutors said Iran's elite Revolutionary Guard Corps and its intelligence officials have repeatedly tried to target Alinejad.

Iran has dismissed as baseless allegations that its intelligence officers sought to kidnap or kill her.

Other people have also been convicted in the U.S. and sentenced in relation to the alleged plot.

Source: Reuters