US and Japan Unite to Support Yen After Four-Decade Low

The US and Japan have jointly intervened to support the yen after it hit a four-decade low. The intervention is the first joint action between the two countries in 28 years.

The yen's weakness has been attributed to the gap between Japanese and US interest rates, which has fueled a 'carry trade' by investors. This has resulted in capital outflows from Japan and further downward pressure on the yen.

US President Donald Trump confirmed the joint action, calling it a 'signal of friendship' with Japan and 'good for the world economy'. He added that the US would not hesitate to participate in further joint intervention.

The Bank of Japan hiked interest rates to 1.0 percent in June, but this is still below the US Federal Reserve's 3.50-3.75 percent rate. This gap means investors can borrow yen cheaply and invest in other assets with better returns, resulting in further capital outflows from Japan.