Fed data shows Japan didn’t tap FIMA facility despite Bessent’s expansion push

The first joint US-Japan currency intervention since 1998 has lifted the yen from 40-year lows, but the unprecedented decision to finance the American side by selling euros rather than dollars has drawn criticism from economists who warn the approach may undermine the operation's credibility and add unwanted liquidity to already frothy markets.

A Rare Coordinated Move

The United States and Japan confirmed on August 2 that they had jointly intervened to buy yen after the currency slid to roughly 163.7 per dollar, its weakest level in nearly four decades. The coordinated action pushed the yen back toward 157, its strongest reading since early May. Japan is estimated to have spent $52.8 billion, while the U.S. contribution was between $5 billion and $10 billion, based on a photographed notepad belonging to Treasury Secretary Scott Bessent.cnbc+3

The New York Fed, acting on behalf of the Treasury, reportedly sold euros rather than dollars to fund the yen purchases — a choice former Treasury officials called "weird" and "unwise". Edwin Truman, a former assistant secretary for international affairs at the Treasury, told Fortune that "selling a third currency would not be as effective as selling just straight dollars." Robin Brooks of the Brookings Institution wrote in a Substack post that "this kind of twist in my opinion undercuts the efficacy of US participation," arguing that intervention is "a confidence game" and "the last thing you want is to give markets any kind of reason to ask questions".fortune+1

Bessent Pushes to Expand FIMA Repo

Beyond the immediate intervention, Bessent has publicly urged the Federal Reserve to expand its Foreign and International Monetary Authorities Repo Facility, which allows foreign central banks to borrow dollars against US Treasuries rather than selling them outright. "The facilities that the Federal Reserve has… the purpose is to protect the U.S. economy and to keep any volatility offshore," Bessent said on CNBC on August 4, adding that the bond market has grown substantially since the facility's $60 billion per-counterparty cap was set in 2020.wtvbam

Yet Bloomberg reported on August 6 that the FIMA facility went unused for an eighth consecutive week, with balances averaging zero through August 5 — suggesting Japan did not tap the tool during its latest intervention.bloomberg

Warnings of Unintended Consequences

The Wall Street Journal noted that the intervention's financing "adds liquidity when the punch bowl of the U.S. economy and markets is already overflowing". Analysts at ING said the move can "buy time" and create "an inflection point" but cannot "overturn fundamentals" like the wide US-Japan interest rate differential. Without narrower rate differentials, "even coordinated intervention risks being remembered as another attempt to slow the dollar's rise rather than reverse it," they wrote.bloomingbit+1

The broader concern is that Bessent's push to remove the $60 billion FIMA cap amounts to giving the Treasury near-unlimited ability to support the yen without congressional oversight, an arrangement critics say was never the facility's intended purpose. The market now waits to see whether the Federal Reserve — which oversees FIMA through its Foreign Currency Subcommittee — will accommodate the Treasury secretary's unusual public request.bloomingbit