Key Takeaways
- Washington and Tokyo are collaborating to bolster the Japanese yen through the Fed’s FIMA facility, which would involve printing dollars to purchase yen
- The Bank of Japan faces severe constraints on aggressive rate hikes due to risks of bond market collapse and unwinding global carry trades
- GPIF, Japan’s massive pension fund, could be compelled to liquidate American equities and bonds to repatriate capital, posing threats to US financial markets
- Expanding the FIMA facility would increase the Federal Reserve’s balance sheet, a development historically correlated with rising Bitcoin valuations
- Former BitMEX CEO Arthur Hayes identifies Bitcoin, Ethereum, and Ethena (ENA) as prime investment opportunities should dollar liquidity flood the system
A coordinated effort between Washington and Tokyo appears underway to elevate the Japanese yen’s value. Treasury Secretary Scott Bessent has openly advocated for broadening a Federal Reserve mechanism that would enable Japan to exchange its US Treasury portfolio for dollars, subsequently deploying those dollars to purchase yen on foreign exchange markets.
The mechanism under discussion is the FIMA Repo Facility. Currently, this program restricts individual counterparties to $60 billion in active loans. Bessent’s proposal calls for eliminating this ceiling and broadening eligibility to encompass major Japanese financial entities, including the Government Pension Investment Fund (GPIF).
The Yen’s Prolonged Decline Explained
The Japanese currency’s extended weakness traces back to Abenomics, launched in 2012. Under former Prime Minister Shinzo Abe’s leadership, the Bank of Japan embarked on unlimited yen creation to purchase government debt through a strategy known as yield curve control. The objective was deliberate currency devaluation to enhance export competitiveness.
The strategy succeeded. Over the subsequent ten years, the yen depreciated by more than 50%. This devalued currency became the preferred financing vehicle globally. Traders borrowed cheaply in yen, invested in higher-return dollar and euro denominated assets, and captured the yield spread.
Implications of FIMA Program Expansion
Should the Federal Reserve’s Foreign Currency Subcommitteeānow led by Fed Chair Kevin Warshāeliminate the FIMA borrowing limit, Japan could leverage up to $1.37 trillion worth of US Treasury securities. This total comprises $1.14 trillion owned by Japan’s government plus $230 billion managed by GPIF.
The Federal Reserve would create fresh dollars to finance these arrangements. This expansion would inflate the Fed’s balance sheet. Historical analysis shows strong correlation between Fed balance sheet growth and Bitcoin price appreciation.
Hayes anticipates this scenario will materialize. He believes Warsh, consistent with his predecessors’ behavior, will align with policy directives from the Trump administration.
Japan lacks viable alternative paths to currency strengthening. Implementing steep interest rate increases would devastate the market value of Japanese government bonds already on the BOJ’s books, generating enormous paper losses. In July 2024, an unexpected BOJ rate adjustment caused the yen to appreciate from 160 to 140 within days, triggering simultaneous 10%+ declines in both the Nasdaq and Nikkei indices. The central bank promptly reversed course.
The alternative approachāforcing Japanese institutions to liquidate US securities and repatriate fundsāremains politically unacceptable. Japan’s security arrangements depend on American military backing, and widespread dumping of US assets would destabilize the Treasury and equity markets that underpin American global power projection.
Therefore, FIMA expansion represents the most politically expedient solution.
Cryptocurrency Investment Opportunities
Hayes identifies Bitcoin as already constituting a fundamental portfolio allocation. For the anticipated next upward movement, he recommends Ethereum as a large-capitalization alternative, noting it remains the sole major cryptocurrency that failed to establish fresh all-time highs during 2025.
He additionally spotlights Ethena, trading under ticker ENA, as a higher-volatility opportunity. ENA has declined over 90% from peak levels. Its stablecoin product USDe has experienced a 75% contraction in circulating supply as Bitcoin basis trade returns diminished. Hayes suggests that even modest Bitcoin appreciation could revitalize USDe yields and attract capital inflows, potentially generating 5x returns on ENA.
Hayes has not yet fully established these positions and awaits official announcement of FIMA regulatory modifications.
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