BitMEX co-founder Arthur Hayes argues the most likely fix for a weakening Japanese yen isn't aggressive Bank of Japan rate hikes or a wave of Treasury sales by Tokyo — it's a quieter mechanism run through the Federal Reserve's FIMA repo facility, one Hayes says would effectively print new dollars and, in the process, fuel Bitcoin, gold, and Ether.
The yen has been the weakest G-10 currency in August, recently weakening past 158 per dollar after Japan's current account unexpectedly swung to a ¥923 billion deficit in June — its first deficit since January 2025, against expectations for a ¥1.512 trillion surplus.
Why Hayes Rules Out the Obvious Fixes
In his Substack essay "Yen Quake", Hayes lays out why he thinks the two conventional responses are politically unworkable. Aggressive BOJ rate hikes would saddle the central bank with steep unrealized losses on its massive Japanese government bond holdings — a preview played out in July 2024, when a rate surprise triggered market chaos that forced the BOJ to reverse course within weeks. Forcing Japanese institutions to repatriate their roughly $1.143 trillion in U.S. Treasury holdings (Japan's Government Pension Investment Fund alone holds about $230 billion) is similarly off the table, Hayes argues, since dumping that scale of Treasuries would destabilize U.S. bond and equity markets that underpin American geopolitical leverage — leverage Japan can't afford to jeopardize given its security dependence on Washington.
Related: US Interest Costs Hit $1 Trillion as National Debt Nears $40 Trillion
The FIMA Route
Instead, Hayes expects the Fed to lean on its Foreign and International Monetary Authorities (FIMA) repo facility, currently capped at $60 billion per counterparty. Under his proposed mechanism, Japan's Ministry of Finance would repo its Treasury holdings at the Fed, receive dollar loans against them, sell those dollars for yen, and reinvest the yen domestically — propping up the currency without an explicit, headline-grabbing Treasury sale. Hayes says the move would likely come from the Fed's Foreign Currency Subcommittee, and predicts it will happen "when no one is looking," comparing the potential liquidity injection to the roughly $4 trillion the Fed printed during COVID. He holds positions in Ether and Ethena's ENA token as bets on the scenario, projecting they could deliver "5-10x" returns if renewed Fed printing pushes Bitcoin basis yields higher.
