JP Morgan Reports Limited US Treasury Liquidity for Yen Defense

Analysts from JP Morgan report that the United States Treasury possesses limited liquidity to support coordinated currency interventions with Japan intended to defend the yen. Current assets in the Treasury's Exchange Stabilization Fund totaled approximately 13 billion euros and 25.5 billion dollars in other foreign assets as of June, figures that are small compared to Japan's recent intervention scales of 35 billion to 60 billion dollars.

While the Treasury could theoretically increase its firepower to 187 billion dollars through unconventional measures, such as swapping foreign-currency assets and converting International Monetary Fund Special Drawing Rights, analysts note that unlimited intervention is unlikely. Involvement from the Federal Reserve System could potentially double that amount, but resources remain finite.

Because further significant expansion of funding would likely require congressional appropriation, JP Morgan suggests the primary burden of defending the yen will continue to fall on Tokyo.