US Treasury Secretary Bezent urges the Federal Reserve to expand FIMA instruments, or intervene in stabilizing the yen attracted attention

Comparing news, US Treasury Secretary Bessent recently publicly called on the Federal Reserve to expand the scope of use of the FIMA Repo Facility (FIMA Repo Facility) by foreign and international monetary authorities, drawing market attention to whether the Federal Reserve will participate more directly in Japan's actions to stabilize the yen.

According to reports, the US has previously supported the stability of the yen through the foreign exchange market; this is rare for the US to directly participate in exchange rate intervention. Bezent hopes that in the future, Japan can obtain US dollar liquidity through FIMA tools rather than selling its US bonds in exchange for capital, so as to avoid selling US bonds to push up yields.

Currently, Japan holds about 1.1 trillion US dollars in US Treasury bonds, and the market estimates that the scale of this Japanese yen intervention is about 60 billion to 80 billion US dollars. The FIMA tool allows foreign central banks to borrow dollars using US bonds as collateral, which can reduce the impact of large-scale sales of US bonds on the market.

However, it is rare for Bezent to publicly request adjustments to the Federal Reserve's instruments. Former US Treasury official Mark Sobel said that in the past, the Treasury Secretary usually communicated and coordinated privately without publicly asking the Federal Reserve to change monetary instruments.

The market is concerned about the position of the new Federal Reserve Chairman Kevin Warsh (Kevin Warsh). Walsh said earlier that the Federal Reserve can cooperate with the executive branch and Congress in the field of international finance and maintain close communication with Bezent.

Analysts pointed out that expanding the FIMA tool may enhance the liquidity management capabilities of foreign central banks holding US bonds, and at the same time reduce the impact on the US bond market when Japan and other countries interfere with the exchange rate. However, the plan involves the Federal Reserve's authority and still requires approval from the Federal Open Market Committee (FOMC).

The market believes that the core of this incident is not only the yen issue, but also that the US Treasury publicly promotes adjustments to the Federal Reserve's policy tools, which may affect the future boundaries of the relationship between the Treasury and the Federal Reserve.