US and Japan Unite to Support Yen Amid Interest Rate Divergence

Japanese authorities and the US Federal Reserve have taken joint action to support the yen for the first time in nearly three decades. The intervention came after the currency sank to its weakest level since 1986, with a value of 163.24 per dollar last month.

The unusual move involved the Federal Reserve Bank of New York selling euros to buy yen on behalf of the US Treasury through Goldman Sachs and Morgan Stanley, according to the Financial Times.

Analysts estimate that 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 move is seen as a response to the widening gap between interest rates in Japan and those in other major economies, particularly the US. This gap has led to investors borrowing cheaply in yen and investing in other assets outside Japan with better returns, known as a 'carry trade', resulting in capital outflows and further weakening of the yen.