Trump Administration May Push Fed to Help Japan Defend Yen
U.S. Treasury Secretary Scott Bessent reportedly wants Japan to use an expanded Federal Reserve facility that allows foreign central banks to borrow against their Treasury holdings, aiming to halt the yen’s slide without disrupting the U.S. bond market.
The Trump administration is considering ways to assist Japan in stabilizing the yen. Treasury Secretary Scott Bessent is backing a plan that would let the Bank of Japan tap an enhanced Fed facility, using its U.S. Treasury securities as collateral for dollar loans rather than selling them outright.
This approach would give Japan the dollars needed for yen-buying intervention without triggering a sell-off in Treasurys. The existing foreign repo pool was expanded into a standing facility in 2021, but it remains underutilized.
Directly pressing the Fed to support a foreign currency intervention is an unusual step, but the White House sees merit in avoiding additional pressure on U.S. bond yields. Details of any formal request have not been disclosed.
Source: FXStreet Forex News