The Japanese yen strengthened in Asian trading on Wednesday against a basket of major and minor currencies, posting its first gain in eight sessions against the US dollar as traders engaged in bargain buying from lower levels, while Japanese monetary authorities closely monitored the key ¥160 threshold.

US Treasury Secretary Scott Bessent said he was confident that Bank of Japan Governor Kazuo Ueda would do “whatever is necessary” if granted sufficient independence by the Japanese government, signaling Washington’s preference for further interest rate hikes by the Japanese central bank.

Price overview

• USD/JPY today: The dollar fell against the yen by 0.15% to ¥158.84, from the day’s opening level at ¥159.08, after touching an intraday high of ¥159.11.

• The yen closed Tuesday down 0.2% against the dollar, marking its seventh consecutive daily loss, while touching a three-week low of ¥159.25 amid continued assessment of developments surrounding the Iran war.

Japanese authorities

Japanese authorities are closely monitoring movements in the domestic currency market, especially as the yen weakens toward the critical ¥160 per dollar level, which is widely viewed as the threshold that could trigger another official intervention.

Sources told Reuters that Tokyo intervened several times in late April and early May to halt the yen’s decline, though the currency’s rebound proved short-lived. The yen recently weakened to ¥159.25 per US dollar, its weakest level since April 30.

The US dollar

The US Dollar Index slipped by less than 0.1% on Wednesday, retreating from a six-week high of 99.43 points, reflecting a slowdown in the dollar’s broad gains against major global currencies.

Beyond profit-taking activity, the dollar weakened following the latest comments from President Donald Trump and Vice President JD Vance regarding the progress of peace negotiations between the United States and Iran.

Trump stated that he would “end the war with Iran very quickly,” expressing confidence in resolving the conflict, while Vice President JD Vance said the United States and Iran had made “very significant progress” in their ongoing talks.

Later today, markets await the release of the minutes from the Federal Reserve’s latest monetary policy meeting, which are expected to provide stronger clues regarding the likelihood of further US interest rate hikes to confront rising inflationary pressures.

Scott Bessent and the Bank of Japan

Bessent told Reuters on Tuesday that he was confident Bank of Japan Governor Kazuo Ueda would do “whatever is necessary” if given enough independence from the Japanese government, signaling Washington’s desire for additional rate hikes from the BOJ.

In a post on X following his meeting with Ueda on Tuesday, Bessent said Japan’s economic fundamentals remain strong and that excessive currency volatility is undesirable, adding that strong economic growth justifies a stronger yen and higher Bank of Japan interest rates.

Japanese interest rates

• Data released Tuesday in Tokyo showed Japan’s economy expanded at an annualized rate of 2.3% in the first quarter of this year, beating market expectations for 1.7% growth, after the world’s fourth-largest economy grew 1.3% in the fourth quarter of last year.

• Following the data, markets raised pricing for the probability of a quarter-point Bank of Japan rate hike at the June meeting from 80% to 85%.

• Investors are now awaiting further Japanese data on inflation, unemployment, and wages in order to reassess those expectations.

The United States announced that China has committed to purchasing at least $17 billion annually in US agricultural products for three years, in addition to soybean imports, following a summit between the leaders of the two countries in Beijing last week.

China is the world’s largest importer of agricultural commodities and had sharply reduced purchases of US products after the latest trade war between the world’s two largest economies. However, both sides have now agreed to expand agricultural trade and address non-tariff barriers affecting beef and poultry, according to China’s Ministry of Commerce.

What does the agreement actually mean?

The $17 billion commitment, combined with the existing soybean obligations, would raise China’s total imports of US agricultural products to around $28–30 billion annually, according to estimates from traders and analysts.

That level would remain below the $38 billion peak reached in 2022, but would be far above the $8 billion recorded last year and the $24 billion seen in 2024.

To reach that target, Beijing would need to significantly increase purchases of wheat, feed grains, meat products, and non-food agricultural commodities such as cotton and timber.

China had previously fulfilled an earlier commitment to purchase 12 million tons of soybeans, along with quantities of wheat and large volumes of sorghum, under a prior agreement between US President Donald Trump and Chinese President Xi Jinping. Under that deal, Beijing pledged to buy at least 25 million tons of soybeans annually.

A reshaping of global trade flows

The increase in Chinese purchases of US agricultural commodities is likely to come at the expense of competing suppliers such as Brazil, Australia, and Canada.

Cheng Kang Wei, vice president at StoneX in Singapore, said achieving the $17 billion annual target excluding soybeans would “likely require a deliberate redirection of purchases away from existing suppliers toward the United States for political and strategic reasons rather than purely commercial ones.”

Brazil is currently the dominant soybean supplier to China, holding a 73.6% market share in 2025, and has also become the country’s largest corn supplier. China also approved imports of Brazilian processed feed products (DDGS) last year.

Australia, which was China’s largest wheat supplier in 2023 and largest sorghum exporter in 2025, could face weaker demand if imports of US wheat and US sorghum increase. Barley imports may also be affected, along with demand for premium Australian beef.

Canadian and French wheat exports, as well as Argentine sorghum shipments, may also face pressure as US purchases expand.

Soybeans remain at the center of the agreement

China is expected to begin purchasing soybeans from the new US harvest starting in October, with US supplies benefiting from more competitive pricing relative to Brazilian shipments.

One vegetable oils trader in Asia said: “Buying 25 million tons of US soybeans does not appear problematic, as US prices are currently attractive.”

COFCO and Sinograin are expected to be among the leading buyers.

China has sharply reduced its dependence on US soybeans since Trump’s first term, with US imports accounting for about one-fifth of China’s total soybean imports in 2024, compared with 41% in 2016.

Corn and wheat

Chinese state-owned companies are expected to remain the main buyers of US corn and wheat, given that these commodities are tied to low-tariff import quotas.

China maintains import quotas of 9.64 million tons for wheat and 7.2 million tons for corn at a 1% tariff rate, while imports exceeding those quotas face steep tariffs of up to 65%.

China’s imports of US corn dropped to just $5 million in 2025 after reaching $561.5 million the previous year, while wheat imports fell close to zero after totaling 1.9 million tons in 2024.

Sorghum and DDGS

China is also expected to increase purchases of feed grains such as sorghum, particularly after heavy rainfall damaged domestic crops in the country’s northern regions.

Sorghum is not subject to import quotas.

Since November, Beijing has purchased at least 2.5 million tons of US sorghum to offset domestic corn shortages, though increasing DDGS purchases would require removing anti-dumping and anti-subsidy duties that have been in place since 2017.

Meat and non-food commodities

China represents a major market for US meat parts such as chicken feet, pig ears, and organ meats, products that face limited domestic demand within the United States.

Imports of beef and poultry are expected to rise after both countries agreed to address outstanding issues. Beijing has already granted five-year registration renewals for 425 US beef export facilities, in addition to approving 77 new facilities.

China also introduced an import quota system for beef in December, with tariffs reaching up to 55% on volumes exceeding quotas in order to protect domestic producers.

Non-food agricultural products

Chinese imports could also include non-food products such as cotton and timber. Cotton imports fell to $225.7 million last year compared with $1.85 billion in 2024.

The Canadian dollar weakened to near its lowest levels in almost five weeks against its US counterpart on Tuesday, after domestic data showed inflation accelerated at a slower-than-expected pace in April, while the US dollar posted broad gains.

The Canadian dollar, known as the “loonie,” fell by 0.1% to CAD 1.3750 against the US dollar, or 72.23 US cents, after touching 1.3773 during trading, its weakest level since April 15.

Data showed that Canada’s consumer price index rose by an annual rate of 2.8% in April, compared with 2.4% in March, driven mainly by a surge in gasoline prices following the war with Iran, which caused a sharp rise in global oil prices.

Analysts had expected headline inflation to reach 3.1%, while core price pressure indicators closely watched by the Bank of Canada declined.

Royce Mendes, head of macro strategy at Desjardins, said in a note: “After concerns about another round of high and persistent inflation, Canadian policymakers can now feel somewhat more comfortable.”

He added: “Although interest rate cuts are not yet on the table, market pricing for two rate hikes appears excessive.”

Swap markets showed traders are now expecting 50 basis points of monetary tightening from the Bank of Canada this year, down from 54 basis points before the data release.

Meanwhile, the US dollar rose against a basket of major currencies, as investors focused on the possibility that the Federal Reserve could adopt a more hawkish stance to contain inflation driven by rising energy prices, while uncertainty surrounding a potential Middle East peace agreement also weighed on market sentiment.

Oil prices — one of Canada’s key exports — were little changed near $108.65 per barrel, remaining close to the upper end of their trading range since early May.

Canadian government bond yields showed mixed performance across a steeper yield curve, with the 10-year yield rising by two basis points to 3.713%, after earlier touching its highest level since May 2024 at 3.744%.

The Canadian government also launched US dollar-denominated global bonds, with final pricing expected on Wednesday.

The halt in fertilizer shipments from the Arabian Gulf due to the war with Iran brought to mind the German chemist Justus von Liebig, one of the leading advocates of the mineral nutrition theory for plants in the 19th century. Liebig is widely known for promoting what is now called “Liebig’s Law of the Minimum.”

This law states that the scarcest essential nutrient is the one that limits plant growth. In other words, once farmers run short of one critical nutrient, adding more of the other nutrients cannot compensate for the missing element.

Liebig’s law now appears set to impose itself in a major and alarming way during the upcoming planting season, because the Arabian Gulf supplies 36% of the world’s urea — one of the main nitrogen fertilizers — along with 29% of anhydrous ammonia, another key nitrogen fertilizer, in addition to 26% of diammonium phosphate and 13% of monoammonium phosphate.

To revisit some high school biology basics, nitrogen, phosphorus, and potassium are the primary nutrients required by plants. These nutrients do not come from air or water and must instead be supplied through the soil. One exception is certain legumes such as soybeans, which are capable of fixing nitrogen from the atmosphere for internal use.

Adding these nutrients to the soil improves both crop quality and yields. But massive quantities of two of the three key nutrients are no longer flowing from the Arabian Gulf.

At the same time, around 20% of the world’s liquefied natural gas exports from the Gulf region have also been disrupted. In countries such as India, imported LNG is used as a feedstock for domestic nitrogen fertilizer production.

There may also be additional complications affecting fertilizer supplies that are not yet fully visible.

Rising prices pressure farmers worldwide

Higher fertilizer prices have already pushed wheat farmers in Argentina to consider reducing their use of urea fertilizer, meaning less nitrogen availability for crops.

The alternative would be shifting toward crops that require fewer fertilizers, which could ultimately reduce wheat output.

In Egypt, one farmer decided to abandon wheat cultivation — a fertilizer-intensive crop — in favor of other crops, while cutting his planted area to only half of its usual size because he could no longer afford fertilizers, seeds, and other agricultural chemicals, including herbicides and pesticides that are often derived from petroleum products.

A recent survey by the American Farm Bureau Federation also showed that 70% of US farmers cannot afford all of their fertilizer needs.

Liebig’s law goes beyond fertilizers

As is becoming increasingly clear, Liebig’s Law does not apply only to agricultural fertilizers.

Modern farming equipment depends almost entirely on diesel fuel. The sharp rise in diesel prices came after US farmers had already made planting decisions for the current season, meaning the immediate impact will likely appear in the form of weaker profits rather than lower production.

However, if diesel prices remain elevated, farmers may eventually reduce planted acreage or switch to lower-cost crops.

Diesel clearly needs to be viewed as an essential agricultural input, just like fertilizer itself.

The foundational materials of modern civilization

The analysis extends far beyond agriculture, as Liebig’s Law can also be applied to the critical inputs underpinning modern society as a whole.

Energy expert Vaclav Smil argues that the modern world depends on four core materials: cement, steel, plastics, and ammonia.

Ammonia, of course, is a key input for nitrogen fertilizer production, which has already been discussed. The other three materials are so deeply embedded in modern life that their importance often goes unnoticed.

Smil highlights an especially important point at a time when oil and natural gas supplies from the Arabian Gulf are being disrupted: production of all four materials relies heavily on fossil fuels.

Beyond these industries, the world now appears close to discovering that losing large amounts of oil and natural gas could constrain the production of a vast range of goods fundamentally dependent on these resources and their derivatives — exactly as Liebig’s Law would predict.

A real test for the global economy

The risk of such constraints on the global economy was always visible to those willing to see it, but the dominant assumption had long been that such limits would never truly emerge, or that if they did, they would only be temporary.

That assumption is now facing a real test.

And if oil analyst Art Berman is correct in his assessment that the world may never again return to the pre-war levels of oil production seen before the conflict with Iran, then the belief in unlimited supply will have to give way to a new reality — one defined by constrained production of many of the world’s most essential materials.