As the Yen Weakens, the U.S. Turns to Stablecoins to Anchor Its Financial Strategy

“Countries that devalue their currency to offset our tariffs will face different forms of retaliation.” – Donald Trump

This statement isn’t just diplomatic bluster. What Trump is really saying is that he won’t tolerate countries undermining U.S. tariffs by weakening their currencies. But does Trump truly dislike weak currencies? Ironically, while he publicly criticizes currency devaluation, his policy framework quietly aims for a paradoxical combination: a strong dollar and low interest rates.

Why such a contradiction? The answer lies in a deeply strategic design that links America’s internal economic structure, global capital flows, and a growing digital monetary ecosystem. From Japan to U.S. bond markets, from stablecoins to monetary hegemony, let’s unpack this complex puzzle.

Japan: Is a Weak Yen Really in America's Favor?

As of March 2025, Japan’s CPI stood at 3.6%, while its policy interest rate remained at just 0.5%. With real inflation around 3%, Japanese households are facing price increases they haven’t seen in over four decades. For many Japanese families—imagine a couple in their 30s—this feels catastrophic. Naturally, distrust in the government and political leadership rises, and Japan has no choice but to consider raising rates.

So how does it make sense that Trump would attack the weak yen, when Japan is already under pressure to tighten? In fact, the yen has already surged to around 139 per dollar. Should Trump and the U.S. administration cheer this move as a win? Not at all. Quite the opposite.

Why? Because:

• U.S. inflationary pressure is also rising (6.7% inflation expectations in April 2025 according to University of Michigan)

• Yen appreciation → Dollar depreciation → Higher U.S. import prices

• A weaker dollar undermines Trump’s strategic preference for a strong-dollar regime

The Real Fear: Unwinding the Yen Carry Trade

If Japan hikes rates, the decades-old yen carry trade begins to unravel. Japan’s ultra-low rates have long allowed Japanese investors to borrow cheaply and funnel capital into U.S. assets—especially U.S. Treasury bonds. Japan is the largest foreign holder of U.S. Treasuries, with $1.13 trillion in holdings.

Rate hikes → Yen strengthens → Borrowed capital flows reverse → U.S. Treasuries sold off → Yields surge → Volatility in bond and stock markets

@K3 Lab

This is a scenario the U.S. cannot afford. That’s why both Treasury Secretary Janet Yellen and even Trump are staying unusually quiet on Japan’s monetary policy, and why Treasury officials like Secretary Bessent are now making dovish remarks on the yen.

What Trump Actually Wants: Strong Dollar + Low Interest Rates

The U.S. is on the brink of an all-out economic and geopolitical rivalry with China. In this setting, inflation control and recession avoidance become critical—and Trump’s formula to balance this? Strong dollar and low rates.

• Tariffs push prices up → Strong dollar needed to suppress import inflation

• Tariffs slow growth → Low rates needed to boost credit and demand

This strategy isn’t a contradiction—it’s a deliberate, layered orchestration of global capital mechanics. But there's a looming issue that threatens this formula: U.S. Treasury demand.

The Disruption of America’s Traditional Growth Engine

For decades, the U.S. followed this growth loop:

1. Domestic consumption surges

2. More imports → More dollar outflows

3. Exporting countries accumulate dollars → Buy U.S. Treasuries to defend their currency

4. Cheap exports → More dollar earnings → More Treasury holdings → More U.S. investment and consumption

However, the tariff war disrupts this cycle:

• Import contraction → Fewer dollar outflows

• Trust breaks → Anti-U.S. countries like China diversify away from Treasuries

@K3 Lab

This leads to fewer Treasury buyers, potentially spiking yields and destabilizing U.S. fiscal and monetary policy. And that’s where Trump’s focus on Bitcoin and stablecoins comes in.

Tether: The Emerging Digital Bond Channel

As of 2025, Tether (USDT) is one of the largest private holders of U.S. Treasuries, holding around $118 billion, more than Canada, Mexico, or Germany. This is because stablecoins like USDT must hold short-term U.S. bonds to maintain their 1:1 peg with the U.S. dollar.

So, as Bitcoin rises and crypto markets expand, demand for USDT increases, and Tether buys more Treasuries to back the new supply. Trump surely sees this and thinks:

“In the future, it’s not governments or corporations that will buy our debt—it’s individual consumers.”[source needed]

That’s the core insight Trump is acting on.

Until now, Treasury demand came mostly from central banks, institutions, and large corporates. But post-tariff realignment, government and corporate demand will shrink due to policy friction and profitability concerns.

This is where stablecoins offer a breakthrough. Most USDT users are individuals, often in emerging markets. These consumers are not impacted by tariffs. In fact, many in Africa, South America, and parts of Asia prefer holding stablecoins over their local currencies. So the U.S. playbook becomes clear:

• Boost demand for stablecoins → Expand their issuance → Increase U.S. bond purchases via Tether

• Replace falling institutional demand with rising grassroots digital demand

America’s Grand Strategy: Rewiring Global Monetary Infrastructure

Through tariffs, the U.S. aims to retain hegemony and restructure global supply chains. Dollar dominance is central to that plan. But now, Washington is no longer telling the world to “hold dollars.”

Instead, it’s making sure no one can afford not to use them.

That’s the essence of the current strong-dollar, low-rate architecture—and it hinges on building a global digital dollar ecosystem.

So yes, Bitcoin’s rise and the growth of crypto aren’t just tolerated by the U.S.—they are strategically essential.

“The dollar isn’t merely a currency. It is a system—and those who rewrite the rules of that system will rule the world.”