US and Japan Team Up to Strengthen Yen Amid Global Market Volatility

The US and Japan have jointly intervened to prop up the yen, which had hit a fresh 40-year low. This rare move is the first since 2011, when both countries took coordinated action to weaken the yen after the devastating earthquake and tsunami that hit eastern Japan.

According to the Japanese finance ministry and US Treasury Secretary Scott Bessent, they will not hesitate to conduct joint interventions in the future if needed. The joint intervention is aimed at preventing a sell-off in the yen and Japanese government bonds from having an impact on the global economy.

The yen's weakness is mainly due to Japan's low central bank interest rates compared to other major economies like the US. Japan raised its main rate to 1% last June, while the US Federal Reserve's benchmark rate is between 3.50% and 3.75%. This makes the Japanese currency less attractive to international investors.

The Bank of Japan data indicates that Tokyo may have sold almost $59bn of US dollars to buy yen when it intervened in New York markets on Thursday, before Friday's confirmed joint intervention with Washington.