Yen Support Hinges on Fed Tool's Use: Evercore Warns of Market Backlash

The Japanese government may face a test of its resolve to support the yen if it uses a rarely employed Federal Reserve liquidity tool.

According to Evercore ISI, the Foreign and International Monetary Authorities Repo Facility could prevent Japan from selling US Treasuries to prop up the currency.

This facility allows overseas entities to use their Treasury holdings as collateral to access dollars instead of selling bonds on the open market.

Created in 2020 during the pandemic, it was made permanent in July 2021.