Yen Repurchase Plan Unleashes $1.37 Trillion Dollar Liquidity Surge
The Japanese yen is considered the most undervalued currency globally, and authorities in both Japan and the US have chosen to strengthen it. The plan involves the Japanese Ministry of Finance repurchasing $1.373 trillion worth of U.S. Treasuries from the Federal Reserve via the FIMA repo facility in exchange for dollars. These dollars will then be used to buy yen on the foreign exchange market, effectively printing money and expanding the Fed's balance sheet.
This move is expected to boost global dollar liquidity, which has historically been followed by a rally in Bitcoin and gold prices. Arthur Hayes, co-founder of BitMEX, believes this will happen due to historical precedent. He has already taken positions in Bitcoin, gold, and gold mining stocks.
The yen's strength has been a major success for global asset markets, but it also comes with consequences. The collapse of the yen's international purchasing power has fueled public anger and xenophobia in Japan. However, there are three ways to strengthen the yen: raising interest rates, encouraging domestic institutions to sell foreign assets, or repurchasing U.S. Treasuries.