Japan holds $1.2 trillion in reserves but over 80% is tied up in securities, limiting liquidity for currency defense.
Japan’s $1.2 trillion foreign currency reserves may not prevent Treasury sales even with Fed support, Goldman Sachs said. The Foreign and International Monetary Authorities (FIMA) repo facility allows central banks to borrow against Treasuries instead of selling them outright, aiming to stabilize bond markets and avoid yield spikes.
Over 80% of Japan’s reserves are held in securities, primarily US Treasuries, reducing liquid cash available for currency intervention. While the Fed facility provides short-term flexibility, it does not eliminate the risk of forced sales if yen defense requires large-scale liquidity.
The analysis follows remarks by US Treasury Secretary Bessent, who noted Fed tools like FIMA and swap lines are designed to protect the US economy and contain volatility offshore.