According to statements published on social media platform X, Bessent also advocated for strengthening the Federal Reserve’s Foreign and International Monetary Authorities (FIMA) Repo Facility to protect global financial stability.
Currency Intervention and the Yen
The announcement follows coordinated market actions by US and Japanese authorities designed to counteract what Bessent described as disorderly movements in the foreign exchange market. According to Reuters, those fluctuations had driven the Japanese currency to multi-decade lows against the US dollar.
“We strongly support Japan’s decisive market and monetary measures to correct the substantial undervaluation of the yen,” Bessent stated in his post. He confirmed that the US Treasury remains in close communication with the Bank of Japan and the Japanese Ministry of Finance, emphasizing that officials will not hesitate to participate in future joint interventions.
Bessent also praised the economic approach of Japanese Prime Minister Sanae Takaichi’s administration. He noted that the government is advancing a new phase of economic policy following nearly 15 years of aggressive stimulus initiatives launched under former Prime Minister Shinzo Abe.
Expanding the FIMA Repo Facility
To support future stabilization efforts, Bessent called for an expansion of the Federal Reserve’s Foreign and International Monetary Authorities (FIMA) Repo Facility. Established during the COVID-19 pandemic, the mechanism allows eligible foreign central banks holding US Treasuries in custody at the Federal Reserve Bank of New York to secure short-term dollar loans.
“The FIMA repo facility is an important backstop,” Bessent wrote. “We should encourage its strengthening in the coming months.”
Data from the US Treasury indicates that Japan held $1,140 billion in US Treasuries as of late May, representing the largest foreign holder of American sovereign debt. Utilizing the FIMA facility enables Tokyo to raise necessary liquidity for currency market operations without being forced to sell its underlying Treasury holdings, a move that could otherwise drive US bond yields higher.
Implications for Federal Reserve Leadership
Expanding the scope or operational parameters of the FIMA facility would require formal authorization from the Federal Open Market Committee (FOMC). Any structural adjustments would add to an already demanding policy agenda facing incoming Federal Reserve leadership, which includes prospective policy reviews regarding central bank communications and balance sheet management.
Foreign central banks and monetary authorities currently maintain slightly less than 3 000 milliards de dollars in deposits with the New York Fed, which includes roughly 2 650 milliards de dollars in US Treasury securities. Federal Reserve officials are not scheduled to hold their next regular policy meeting until mid-September, leaving extraordinary measures dependent on consensus among current FOMC participants.
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