Arthur Hayes has outlined a proposal for Japan to support the yen through the Federal Reserve’s FIMA repo facility, arguing that the mechanism could reduce pressure for disruptive Bank of Japan rate increases or large sales of U.S. securities by Japanese institutions.
The former BitMEX chief executive’s thesis centers on a temporary financing arrangement: Japan’s Ministry of Finance could pledge U.S. Treasuries to the Fed through the Foreign and International Monetary Authorities, or FIMA, repo facility, receive dollars, then sell those dollars to buy yen in foreign-exchange markets. Hayes argues that route could deliver yen support without requiring Japan to liquidate Treasuries in the open market.
Hayes linked the idea to policy efforts in Tokyo and Washington to push USD/JPY lower after recent market action described by officials as intervention. He placed the dollar-yen rate near 159.30 in mid-August 2026, a level that keeps Japan’s currency weakness high on the agenda for policymakers facing rising import costs and volatile foreign-exchange markets.
A third route for yen intervention
Hayes described three potential paths for a stronger yen: aggressive Bank of Japan tightening, repatriation of foreign holdings by major Japanese institutions, or expanded use of FIMA repos. He presented the third option as the least damaging to financial markets, though it would require the Federal Reserve to alter limits and eligibility rules governing the facility.
The Bank of Japan’s rate policy remains constrained by the large gap between Japanese and U.S. yields, according to Hayes. He put the difference at 2.75 percentage points in favor of dollar assets, a spread that has supported the yen-funded carry trade. In that strategy, traders borrow at comparatively low Japanese interest rates and place funds in higher-yielding dollar assets.
Closing the gap with rapid BOJ increases could create losses on Japanese government bonds acquired during years of yield-curve control, Hayes said. Higher rates would also raise Japan’s debt-servicing costs, an especially sensitive issue for a government carrying one of the developed world’s largest public-debt burdens relative to economic output.
Hayes pointed to July 2024 as an example of how sharply markets can react to a surprise Japanese rate move. He said USD/JPY fell from about 160 to 140 in a few trading days after an unexpected BOJ hike, while the Nasdaq 100 and Nikkei each dropped by more than 10% during the period. He also cited an Aug. 12 BOJ statement saying policymakers would consider market conditions when judging future rate decisions.
That experience supports Hayes’s view that a major tightening campaign would risk unwinding global carry positions too quickly. A rapid yen advance raises the cost of funding for traders who borrowed yen, potentially forcing sales across equities, bonds and other risk assets.
Repatriation faces institutional obstacles
The second route Hayes examined involves Japan bringing overseas capital back into domestic assets. He focused on the Government Pension Investment Fund, or GPIF, which he described as a central source of long-term foreign portfolio investment.
Japan’s large institutional allocation to overseas securities has historically required purchases of foreign currencies and sales of yen. Hayes said a recent comment from Katayama, described as the finance ministry’s top official, suggested that GPIF’s strategy could shift toward domestic securities. The fund’s bureaucracy has publicly resisted a major change, he added.
A broad repatriation campaign could lift yen demand, but it could also put substantial selling pressure on foreign government bonds and equities. Japan is among the largest foreign holders of U.S. Treasuries, making its portfolio choices closely watched in Washington as well as Tokyo.
Hayes argues that FIMA repos would give Japanese authorities a way to mobilize Treasury holdings without selling them outright. Under a repo transaction, the collateral is pledged temporarily in exchange for dollars and returned when the transaction is repaid. That structure would preserve Japan’s Treasury exposure while providing short-term dollar liquidity for currency operations.
The $60 billion constraint
The proposal runs into a clear limit under the FIMA facility’s current terms. The Federal Reserve caps outstanding loans at $60 billion per counterparty, a figure Hayes said would be insufficient for large and sustained currency operations.
He compared the cap with a recent USD/JPY operation that, in his account, deployed more than $100 billion and produced roughly a 5% yen gain that lasted only a few trading days. A facility designed around $60 billion in temporary funding would have limited firepower if officials were attempting to defend a currency level over a longer period.
Hayes said Japan could use the mechanism at greater scale only if the Fed removed or lifted the cap and expanded eligible counterparties beyond official institutions. He named GPIF and large Japanese quasi-public entities as possible candidates, though neither the Federal Reserve nor Japanese authorities have announced such a change.
Under current FIMA rules, U.S. Treasuries are the eligible collateral. Hayes estimated that the Japanese government holds $1.143 trillion of Treasuries and GPIF holds another $230 billion, for a combined total of about $1.373 trillion. Those figures point to a large potential collateral base, even if only a fraction could be used in practice.
Liquidity implications for crypto markets
Hayes connected a larger FIMA operation to global dollar liquidity and, in turn, to Bitcoin, gold and selected crypto assets. He argued that Fed repo lending against foreign Treasury collateral would expand the central bank’s balance sheet while Japanese authorities converted the dollars into yen and deployed yen proceeds into domestic securities such as Japanese government bonds and equities.
The comparison has limits. FIMA repos are temporary secured lending operations rather than permanent Treasury purchases, and their market impact would depend on their size, duration, repayment terms and Japan’s actual foreign-exchange activity. A higher FIMA balance alone would not establish that new funds were flowing into Bitcoin or other digital assets.
Hayes nevertheless drew parallels with the Federal Reserve’s pandemic-era balance-sheet expansion, which he estimated at about $4 trillion from 2020 through the end of 2021. Bitcoin rose sharply during that period, although crypto prices were also influenced by institutional adoption, fiscal stimulus, low interest rates and changing risk appetite.
His most specific trading view concerned Ethena’s ENA token. Hayes said ENA’s circulating supply had fallen 75% from its peak and its price had declined more than 90%. He attributed the weakness partly to lower Bitcoin basis returns and reduced yields for USDe holders, arguing that improved dollar liquidity could revive demand for the protocol’s yield-generating products. He suggested ENA could gain five to 10 times over coming months, a forecast that remains speculative and depends on policy decisions that have not been announced.
For now, Hayes’s FIMA scenario remains a policy proposal rather than an official plan. Its appeal lies in the possibility that Japan could support the yen using Treasury collateral instead of selling Treasuries or forcing a sharp domestic rate reset—while leaving the Fed with a decisive role in determining how much capacity the mechanism could provide.
Explore how Fed liquidity, FX policy and crypto performance intersect in our macro guide: read more today.
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