Bessent Pledges to Repeat Joint Yen Intervention, Backs Expansion of Fed Lending Facility

US Treasury Secretary Scott Bessent has stated that he is prepared to repeat a joint intervention in the foreign exchange market alongside Japan, citing disorderly yen movements as the reason. The coordinated action between the US and Japan on Friday used the Federal Reserve's Foreign and International Monetary Authorities lending facility, known as FIMA. Bessent emphasized the importance of this backstop, urging that it be 'upsized' in the coming months.

The FIMA Repo Facility allows foreign central banks and monetary authorities to borrow up to $60 billion in US dollars for up to seven days at a rate typically above the open-market repo rate. Bessent noted that Japan held over $1.14 trillion of Treasuries, the most of any foreign nation, and suggested that tapping into FIMA might enable Japan to raise funds for yen purchases without selling its Treasury holdings outright.

Bessent praised Japan's recent market and monetary steps to correct the substantial undervaluation of the yen, stating that 'we will not hesitate to participate in further joint intervention.' He also lauded Japanese Prime Minister Sanae Takaichi's government for moving into an exciting new phase of Abenomics.