Study these charts closely... You'll need them for future reference.

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The biggest fear for the US is Japan selling its bonds. Bessent made this clear yesterday.

US Treasury Secretary Bessent made a statement yesterday regarding intervention in Japan.

In short, he said:

"We stand with our allies. Economic security is also national security. We will intervene again if necessary."

Everyone read this and understood it as the US helping its friend.

However, in the middle of the text, he wrote:

"The FIMA Repo Facility is an important support mechanism; we recommend expanding it in the coming months."

No one paid attention to this sentence because it seemed technical. Yet, this is the most serious part of the statement.

He means:

"When Japan needs dollars, it shouldn't sell its US bonds on the market, but instead pledge them to the Fed."

Now, let me explain how the mechanism works.

Foreign central banks can give their US bonds as collateral to the Fed and receive temporary dollars in return.

They buy back the bonds at maturity. The transaction is done overnight and can be extended as long as the need persists.

The mechanism was established in 2020 and made permanent in 2021.

The Fed stated its purpose in its own text.

To reduce the need for central banks to directly sell their bonds on the market, thus preventing distortion in the bond market and upward pressure on yields.

So, the mechanism was established for this purpose from the outset.

Now apply this to Japan.

Japan needs dollars to defend the yen, and it can obtain those dollars in two ways.

Think of it this way:

You have a valuable asset and you need cash.

You can either sell that asset on the market or pawn it and receive money in return.

If you sell it on the market, the supply increases, the price falls, and the transaction takes place in plain sight.

If you pawn it, the supply doesn't increase, the price doesn't fluctuate, and the transaction remains between the two parties.

Japan's asset is US Treasury bonds.

The amount is approximately $1.2 trillion, making it the country holding the most US Treasury bonds in the world.

If it sells those bonds on the market, the US borrowing cost will directly increase. If it pledges them to the Fed, nothing will happen.

Bessent wants to expand the capacity of the second option.

The timing is no coincidence either.

The US has to refinance $10 trillion of debt maturing this year. It cannot afford to have its biggest buyer turn into a seller in the year it sells its own bonds.

Now step back and look.

This week a reporter asked Trump why the US defends the yen.

Trump mentioned Japan as a good ally.

Bessent also wrote that the alliance is based on economic security.

Both of them talked about Japan.

What both of them were defending was the US debt book.