After the US-Japan joint intervention in the currency market and the support for the yen, on August 3 local time, US Treasury Secretary Jack Lew posted a message on social media platform X, praising the Federal Reserve's 'Foreign and International Monetary Authority Repurchase Facility' (FIMA). He publicly called for the Federal Reserve to continue and expand the use of this tool, providing 'backing support' for the US-Japan intervention in the currency market.
Bloomberg News noted that this was an unprecedented public call from U.S. Treasury Secretary "rare" in American history.
Bessenant said that the Trump administration has been a reliable partner for the United States—providing support to Japan.
"Friday's foreign exchange coordination action responded to the chaos of yen movements," he said. "The Ministry of Finance maintains a high level of attention and keeps close communication with counterparts at the Japanese Finance Ministry and Bank of Japan." We will not hesitate to participate in further joint intervention."
He said that FIMA's repurchase of convenience stores is a "crucial backup support," and we encourage expanding its scale in the coming months.
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According to Reuters, the FIMA repurchase facility was created by the Federal Reserve during the pandemic. Economies that hold U.S. government bonds in New York’s Treasury Department can use this facility to apply for up to $6 billion in U.S. dollars loans, with a maximum term of 7 days. The loan interest rates are typically higher than the open market repo rate, so this facility is designed to be used only when market conditions are pressured.
According to Bloomberg, Japanese Finance Minister Sadao Kato confirmed that Japan bought yen last Friday and will use the Federal Reserve's FIMA tool in the future. The Federal Reserve declined to comment.
Bloomberg reports that it is not uncommon for the Federal Reserve and the Treasury Department to cooperate in order to ensure financial stability.
Market participants stated that the volatility in US Treasury bond yields provided ample justification for the Federal Reserve to intervene to stabilize Japanese currency manipulation, as Japan’s sale of its holdings of US Treasury bonds could exacerbate the situation. Data from the US Department of the Treasury showed that as of the end of May this year, Japan held $1.14 trillion in US Treasury bonds, making it the world’s largest holder of such bonds, second only to the Federal Reserve itself.
Despite this, people closely monitoring the Federal Reserve have noted that the Treasury Secretary's public urging for a change in the Fed's toolkit is rare.
"This is highly unusual," said Mark Sōbel, a senior official at the Ministry of Finance. "During my tenure as Minister, Treasury officials have been unwilling to publicly discuss matters concerning the US Federal Reserve's monetary policy operation. If such occasions arose, they would privately communicate with the Chairman of the US Federal Reserve and handle these matters behind the scenes."
Stephen Milan, Chief Macro Strategist at Drogbni Investment Management in the United States and former Fed governor, said that expanding the FIMA facility poses no significant risk to the Federal Reserve, both politically and due to the financial market risks involved. "Since the loans are short-term, backed by U.S. government bonds, and interest must be paid, there is no risk to the Federal Reserve."
However, Tobin Marcus, a researcher at Wolf Research Company, said that for Federal Reserve observers, the openness advocated by Besنت is more striking than the request itself.
Since the beginning of this year, the Japanese yen has been weakening. In late July, the yen exchange rate dropped to nearly 164 yen per dollar. According to Kyodo News, the Japanese government and the Bank of Japan may have implemented intervention measures worth about 6 to 7 trillion yen on July 30. Combined with subsequent joint interventions and other measures, the yen exchange rate rose by more than 6 yen per dollar within a week.
According to a report by the Japanese Kyodo News, on August 3, Japanese Finance Minister Takeyoshi Katsumi stated that the Japanese and American governments jointly intervened in the foreign exchange market on July 31, Eastern Time. This was the first time the two countries had intervened in the currency market together in 15 years, and both countries are prepared to take further action if necessary.
It is reported that the last joint intervention by Japan and the United States occurred after the Great East Japan Earthquake in 2011, when the G7 countries jointly carried out the operation.
On August 2, U.S. President Trump told media while on board Air Force One about the reasons why the U.S. government intervened in the Japanese currency market, stating, "Due to the continuous depreciation of the Japanese yen, Japan has sought some assistance from us."
“Japan has always been good to us, except for the surprise attack on Pearl Harbor” Video screenshot
He pointed out that the US has gained economic benefits through its interventions.
Additionally, Trump emphasized that this action was "more of a signal of friendship." "We have good relations with Japan and have always supported Japan. Apart from the surprise attack on Pearl Harbor, Japan has always been very good to us."
