Bessent Urges Fed to Expand FIMA for Japan’s $1.14 Trillion Treasurys as Yen Slides
Updated
Updated · palipost.com · Aug 10
Bessent Urges Fed to Expand FIMA for Japan’s $1.14 Trillion Treasurys as Yen Slides
2 articles · Updated · palipost.com · Aug 10
Summary
Scott Bessent last week pressed the Federal Reserve to enlarge its FIMA repo facility so Japan can borrow dollars against Treasurys and buy yen without dumping U.S. bonds.
Japan held $1.14 trillion in Treasurys at end-May, and the proposal aims to stop yen support operations or investor repatriation from driving already-elevated long-dated U.S. yields even higher.
FIMA, created in March 2020 and made permanent in 2021, would avoid outright bond sales but still expand the Fed’s balance sheet and dollar reserves if used repeatedly.
Critics say that would blur the Fed-Treasury boundary by using central-bank liquidity to support both Treasury market conditions and a currency objective, echoing tensions that led to the 1951 Accord.
The broader risk is that temporary intervention may fail to fix the yen’s underlying weaknesses and leave the Fed struggling to exit support without triggering the yield spike it sought to prevent.