Bessent Publicly Urges Fed to Expand Yen-Support Facility, Raising Independence Concerns

US Treasury Secretary Scott Bessent has publicly urged the Federal Reserve to expand a liquidity facility that helps support Japan’s defense of the yen, intensifying questions about the central bank’s independence.

Bloomberg reported on Aug. 3 that Bessent raised the need to expand the Fed’s Foreign and International Monetary Authorities, or FIMA, repo facility after the US and Japan jointly intervened in the yen market.

"FIMA is playing an important role in Japan’s market-stabilization efforts," Bessent wrote on social media. He added that he hopes the program will be expanded in the coming months.

The FIMA facility allows foreign central banks and governments to borrow dollars on a short-term basis against their holdings of US Treasuries. If Japan uses the facility instead of selling Treasuries outright to buy yen, it can reduce the shock to the US Treasury market.

Japan also confirmed the move. Japanese Finance Minister Satsuki Katayama said the country bought yen last week and plans to continue using the FIMA facility. The Fed declined to comment.

Investors view it as unusual for a Treasury secretary to publicly press for a change in Fed policy. Mark Sobel, a former senior US Treasury official, said past Treasury secretaries were extremely reluctant to comment publicly on matters related to Fed policy. If needed, they would have discussed the issue privately with the Fed chair, he added.

Any increase in the FIMA facility’s transaction limit would require approval from the foreign exchange subcommittee under the Federal Open Market Committee, or FOMC.

Bessent’s remarks came as the Trump administration pressures the Fed to refrain from raising benchmark interest rates. He has also previously proposed expanding currency swap lines to more countries to reinforce the dollar’s dominance.

Stephen Kamin, a former Fed director who is now a senior fellow at the American Enterprise Institute, said the Fed would benefit if Japan uses FIMA rather than selling large amounts of Treasuries, assuming Tokyo is going to defend the yen anyway.

Eric Wallerstein, chief macro strategist at The Clark Tower Group, said the Fed would face limited risk because FIMA consists of short-term loans backed by Treasuries.

By contrast, Wolfe Research analyst Tobin Marcus said the unusual part was less the request itself than the Treasury making it in public.