On Aug. 4, BlockBeats reported that U.S. Treasury Secretary Bessent had publicly called on the Federal Reserve to expand the scope of the Foreign and International Monetary Authorities Repo Facility, or FIMA Repo Facility. The move has drawn market attention to whether the Fed could take a more direct role in actions linked to Japan’s efforts to stabilize the yen.
According to the report, the United States had previously supported yen stabilization through the foreign exchange market, a relatively rare case of direct U.S. participation in exchange-rate intervention.
Bessent wants Japan to tap FIMA instead of selling Treasuries
Bessent wants Japan to be able to obtain dollar liquidity through the FIMA facility in the future rather than raising cash by selling its U.S. Treasury holdings. The stated rationale is to avoid Treasury sales that could push yields higher.
Japan currently holds about $1.1 trillion in U.S. Treasuries. The market has estimated the scale of the latest yen intervention at around $60 billion to $80 billion.
The FIMA facility allows foreign central banks to borrow dollars by posting Treasuries as collateral. That structure can reduce the market shock that may come with large-scale Treasury selling.
Public pressure on a Fed tool is seen as unusual
The report said Bessent’s decision to openly ask for an adjustment to a Federal Reserve facility is unusual. Mark Sobel, a former U.S. Treasury official, said Treasury secretaries have generally coordinated through private communication rather than publicly asking the Fed to change a monetary tool.
Markets are watching Kevin Warsh
Markets are also focused on the stance of new Federal Reserve Chair Kevin Warsh. Warsh previously said the Fed can work with the administration and Congress in international finance and has stayed in close communication with Bessent.
Some analysts cited in the report said a broader FIMA facility could improve foreign central banks’ liquidity management around their Treasury holdings and reduce the impact on the U.S. Treasury market when countries such as Japan intervene in currency markets.
Still, the plan touches on the Federal Reserve’s authority and would require approval from the Federal Open Market Committee, or FOMC.
In the market’s view, the issue goes beyond the yen alone. It also centers on the U.S. Treasury publicly pushing for changes to a Federal Reserve policy tool, a development that could affect the future boundary between the Treasury Department and the Fed.