US and Japan Unite to Support Weak Yen in Rare Joint Intervention

The US and Japan have taken joint action to support the Japanese yen for the first time in nearly three decades, as the currency hit its weakest level since 1986. The intervention was triggered by the yen's decline to 163.24 per dollar last month due to higher US interest rates, rising oil prices, and persistent capital outflows.

According to the Financial Times (FT), the Federal Reserve Bank of New York sold euros to buy yen on behalf of the US Treasury through Goldman Sachs and Morgan Stanley. The transactions were carried out on Friday, with the yen rebounding sharply last week, sparking speculation that Japanese authorities had also intervened in currency markets.

While Tokyo's involvement is unclear, analysts estimate Japan's intervention may have totaled around 8.45 trillion yen ($52.8 billion), with some putting the amount between 6 trillion and 7 trillion yen. The wide gap between interest rates in Japan and other major economies has encouraged investors to engage in a 'carry trade', borrowing cheaply in yen to invest elsewhere, resulting in capital outflows and a weakening yen.