Bessent ready to repeat joint yen intervention, urges bigger Fed backstop

US Treasury Secretary Scott Bessent has reaffirmed his willingness to repeat a joint US-Japan foreign exchange intervention, urging the Federal Reserve to expand its lending capacity. The intervention, which took place on Friday, aimed to stabilize disorderly yen movements that reached new 40-year lows against the dollar. Bessent highlighted the effectiveness of the Federal and International Monetary Authorities (FIMA) Repo Facility, a tool created during the Covid-19 pandemic, which enabled participating countries to access up to $60 billion in US dollar loans for up to seven days.

He emphasized the importance of increasing the facility's firepower, stating that it would be particularly beneficial during periods of market stress. The expanded lending capacity would allow Japan to raise funds for yen purchases without having to sell its substantial Treasury holdings. As of May, Japan held $1.14 trillion in US Treasuries, the largest amount among foreign nations.

Any changes to the FIMA facility's lending parameters would require approval from the Federal Open Market Committee (FOMC), which is not expected to meet again until mid-September. Bessent praised Japanese Prime Minister Sanae Takaichi's government for its decisive actions to correct the undervaluation of the yen, describing it as an exciting new phase of Abenomics, a series of economic policies launched in 2012 to combat deflation and stagnation.