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Japan-US Cooperate on Market Stability
2 Aug
Summary
- Japan can access Fed's repurchase facility for dollar liquidity.
- This avoids selling US Treasuries, easing intervention funding.
- US and Japan collaborate amid inflation and yield concerns.
Japan has secured access to the U.S. Federal Reserve's repurchase facility, a crucial tool for obtaining temporary dollar liquidity. This rare English announcement from Japan's Ministry of Finance signals bilateral coordination aimed at stabilizing markets. The facility, originally established in 2020, allows Japan to acquire dollars without needing to sell its substantial U.S. Treasury reserves.
This arrangement addresses concerns about Japan's capacity for yen-buying intervention. Critics had warned that extensive sales of U.S. debt could destabilize markets and increase American yields. Analysts suggest Washington's involvement stems from its own worries about rising Treasury yields, which could be exacerbated by a disorderly yen devaluation.
Both nations appear to be jointly managing risks associated with potentially persistent inflation. Officials highlight the importance of maintaining market confidence in Japan's fiscal sustainability, with government representatives promising enhanced communication with markets regarding Japanese Government Bond yields.
