U.S. and Japan Press Fed to Expand FIMA Repo as a Tool to Support the Yen

Overview

• Japan’s finance ministry confirmed it coordinated a yen purchase with the U.S. Treasury and has said it plans to use the Fed’s FIMA repo facility as part of future yen support efforts.
• U.S. Treasury Secretary Scott Bessent has publicly urged the Federal Reserve to increase FIMA’s size and broaden which Japanese institutions can use it.
• BitMEX co-founder Arthur Hayes wrote on Aug. 11 that removing the Fed’s $60 billion-per-counterparty cap and widening eligibility could let Japan mobilize as much as about $1.37 trillion of Treasuries as repo collateral.
• The scenario remains unproven because current Fed rules limit FIMA to $60 billion per approved counterparty, eligibility excludes many large Japanese holdings today, and the Fed’s Aug. 6 H.4.1 balance sheet showed no large FIMA draw.
• If the Fed does loosen limits and usage follows, the move would temporarily expand reserve liquidity and the Fed’s balance sheet, which analysts say could lift scarce monetary assets such as Bitcoin, Ether and gold, while helping Japan avoid aggressive BOJ rate moves or mass sales of U.S. assets.