Global Liquidity: Could the Japanese Oil Crisis Collapse US Treasuries?

Global financial market attention is turning to Japan and its energy security strategies. A recent analysis by @SternDrewCrypto, published on X, highlights the deep vulnerability of the Asian country and its potential systemic repercussions. Furthermore, Japan's ability to handle an oil crisis could trigger a large-scale event, transforming an energy issue into a concern of Global Liquidity.

The focus of the discussion is on Japan's preparation for prolonged oil supply disruptions. Indeed, this raises critical questions about the stability of financial markets, especially the US Treasury market, valued at $30 trillion. The analyst warns of a cascade of events that could culminate in an unprecedented liquidity crisis.

Japan on Alert: Threat to Energy Security

Japan's Minister of Trade, Ryosei Akazawa, publicly announced that the country is preparing for prolonged oil supply disruptions. He called for massive energy storage and the construction of new infrastructure across Asia. Therefore, this measure is a direct response to Japan's extreme dependence on the Middle East for its energy supply.

Japan imports over 99% of its crude oil and energy from the region. Specifically, 90.7% of oil, 97.7% of liquefied natural gas (LNG), and 99.6% of coal come from there. Any blockage in the Strait of Hormuz represents an immediate existential threat to the Japanese economy. A common reading in the market points to this admission as an open confession of structural panic, rather than just routine disaster preparedness.

Japan's Geopolitical Vulnerability

When an industrial superpower imports over 90% of its fuel through a single geopolitical choke point, any tremor in the Strait of Hormuz transcends a simple inflation spike. It becomes an existential threat to the entire domestic network. In this sense, there are reports that Minister Akazawa has been actively working to mitigate these risks:

• He requested the G7 to align more coordinated fuel reserve releases.
• He met with the UAE's industry minister in Abu Dhabi to secure crude oil from the United Arab Emirates.
• He did not rule out the possibility of resorting to Japan's national reserves.

Additionally, notes from internal meetings in Australia, dated April 28, indicate that Asia would be the most affected region by a possible closure of Hormuz. It is worth noting that crude oil has remained between $90 and $100 per barrel over the past eight months, showing persistent pressure on global prices.

The Fragility of the Yen and the Reverse Carry Trade

A crucial aspect of @SternDrewCrypto's analysis involves the possible repricing of oil in yen. Yuto Kanzaki (@yutokanzakireal), from Japan, revealed that significant "off-the-record" deals were made to secure Japan's oil demand. Markets immediately interpreted the implication: oil priced in yen.

If this indeed happens, the "yen carry trade" could be affected significantly.

Source: original analysis published by @SternDrewCrypto on X.

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