Japan, U.S. move to steady yen, tap Fed facility

Japanese yen and U.S. dollar banknotes on FX desk illustrating efforts to steady yen and tap Fed facility

Key Points

01Japan and the U.S. carried out a coordinated FX intervention to address disorderly yen moves
02Tokyo plans to use the Federal Reserve’s FIMA repo facility for dollar liquidity
03FIMA lets foreign authorities swap Treasuries for short term dollars instead of selling them
04U.S. Treasury Secretary Bessent signaled readiness for further joint interventions

Joint action to counter yen volatility

Japanese monetary authorities intervened in the foreign exchange market to address what they described as recent excessive volatility and disorderly movements of the yen. The operation was conducted in accordance with a joint statement of the Japanese and U.S. finance ministers issued in September 2025, underscoring a coordinated policy framework between the two governments.

U.S. officials confirmed that the joint foreign exchange actions were aimed at countering disorderly yen movements. The intervention highlighted the two countries’ willingness to act together when currency moves are seen as destabilizing market conditions.

Planned use of the Fed’s FIMA repo facility

Japan’s Finance Ministry announced plans to utilize the Federal Reserve’s Foreign and International Monetary Authorities repo facility as part of its response toolkit. The facility is designed for approved foreign central banks and monetary authorities, allowing them to obtain short term U.S. dollars by temporarily exchanging U.S. Treasury securities.

By accessing dollar liquidity through FIMA, authorities can secure funding for operations such as foreign exchange intervention without immediately resorting to outright sales of Treasury holdings. This mechanism provides an additional option for managing liquidity during periods of market stress.

U.S. Treasury’s stance and future coordination

U.S. Treasury Secretary Scott Bessent said the recent coordinated actions successfully countered disorderly yen movements. He stated that the Treasury remains attentive and in close communication with counterparts at Japan’s Finance Ministry and the Bank of Japan and will not hesitate to participate in further joint intervention if needed.

Bessent described the FIMA repo facility as an important backstop for global dollar funding and indicated support for increasing its capacity in the coming months. He also emphasized that Japan’s monetary authorities have a broad range of tools to address market liquidity needs and stand prepared to use available instruments to support orderly market functioning, including potential access to the FIMA facility.

Implications for funding and market functioning

Market observers noted that using the FIMA route allows authorities to obtain dollar liquidity by temporarily pledging Treasuries rather than selling them outright. This structure can reduce pressure on the U.S. Treasury market during periods when Japan is intervening to stabilize the yen.

Commentary also highlighted that aspects of the U.S. funding side of the operation, including the use of a funding mix such as selling euros instead of dollars, surprised some participants and may influence perceptions of the U.S. role in helping Japan limit forced Treasury sales. Overall, the recent steps signal ongoing coordination between the two governments to manage currency volatility while seeking to preserve orderly conditions in key funding and government bond markets.

Key Takeaways

01Coordinated yen support operations are being conducted within an agreed bilateral framework, signaling a structured approach to handling sharp currency moves.
02Planned use of the Fed’s FIMA repo facility gives Japan an option to raise dollars without immediately shrinking its U.S. Treasury holdings.
03U.S. officials are framing FIMA as a key liquidity backstop and are open to expanding it, reinforcing its role in managing global dollar funding stress.

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