Overview
- Japan said it coordinated a yen purchase with Washington on July 31 and the Ministry of Finance has publicly confirmed it plans to use the Fed’s FIMA repo facility in future interventions.
- U.S. Treasury Secretary Scott Bessent has publicly urged the Fed to raise FIMA’s size and broaden eligible counterparties to give Japan more options to source dollars without outright Treasury sales.
- FIMA currently lets approved foreign official accounts temporarily repo U.S. Treasuries for overnight or seven-day dollars and limits outstanding exposure to about $60 billion per counterparty, a ceiling the Fed subcommittee can change.
- The Federal Reserve’s Aug. 6 H.4.1 balance sheet showed essentially zero foreign-official repo balances, so large FIMA-driven dollar liquidity has not yet appeared and markets are watching for a formal subcommittee change and rising repo balances as the next signals.
- Analysts disagree on the effects: Arthur Hayes argues a big, persistent FIMA expansion could add dollar liquidity that lifts assets like Bitcoin and gold, while Goldman Sachs warns FIMA can only smooth market impact and would not avoid eventual Treasury sales or roll-off pressure on U.S. yields.