Fed Tapped to Back Japan's Yen in Unprecedented Intervention

The Federal Reserve may soon become involved in efforts to support Japan's embattled yen. Treasury Secretary Scott Bessent has asked the Fed to expand a lending facility that would enable Japan to back its currency without affecting the U.S. Treasury market.

Bessent wants the Fed to 'upsize' the Foreign and International Monetary Authorities (FIMA) Repo Facility, which allows foreign central banks to lend their Treasuries for short periods rather than selling them.

The yen has been sliding since 2022 due to factors such as Japan's huge debt, a shrinking population, and expensive energy imports. The slide can stoke inflation by making imports more expensive.

Treasury Secretary Scott Bessent said the U.S. had intervened in foreign exchange markets to support the Japanese yen, which has been sliding sharply since 2022. He wants Japan to use a Fed borrowing facility called the FIMA Repo Facility.