US-Japan Coordinate Yen Intervention Amid Prolonged Currency Volatility

The Japanese and US governments have coordinated an intervention in the foreign exchange market to support the yen. This joint action marks the first such move since 2011, following a period of prolonged yen weakness that has seen it drop to multi-decade lows against the dollar.

The interest rate differential between Japan and the US remains a significant factor, with the Bank of Japan's low rates encouraging investors to favour dollar-denominated assets. This has led to capital flows strengthening the dollar and pushing the yen down.

The intervention saw both governments buy yen and sell dollars, with the Japanese currency gaining over 1% in early trading. The coordinated action underscores growing concerns over excessive currency volatility, which has raised import costs and fuelled inflationary pressures.