Japan's currency mess is getting worse, and it threatens the US bond market — bad news for the dollar and for Trump's factory plans.

• Japan spent over $100 billion trying to prop up the yen, and it's already failing — the yen is sliding back toward its weakest levels.
• To defend the currency, the Bank of Japan had to raise interest rates, which slammed the value of the long-term bonds Japan's big insurers hold.
• Japan's four biggest insurers are now sitting on a combined $96 billion in bond losses, and customers may cash out old low-yield policies for better returns elsewhere.
• To raise cash, those insurers could dump the roughly $350 billion in US stocks and Treasuries they own, hammering the US bond market.
• High oil prices and the Iran standoff keep pressuring Japan, since it imports almost all its energy.

Outlook: If the Bank of Japan keeps hiking rates, expect more strain on Japan's insurers, more dollar-selling to defend the yen, and pressure on the US to weaken the dollar to stop the whole chain from breaking.