US and Japan jointly intervene to prop up yen in rare move
Summary
Japan and the United States worked together last week to stop the Japanese yen from falling to its weakest level in 40 years. This joint effort is the first since 2011 and aims to keep the yen stable and protect the global economy.Key Facts
- Japan and the US intervened together to support the yen, which had dropped to a 40-year low.
- This was the first joint action since 2011, when both countries acted after a major earthquake and tsunami in Japan.
- Both governments said they are ready to intervene jointly again if needed.
- The yen has weakened because Japan’s central bank interest rates are much lower than US rates, making the yen less attractive to investors.
- The Bank of Japan increased its key interest rate recently to 1%, still lower than the US rate of 3.50%-3.75%.
- Japan faces long-term economic challenges like a shrinking working-age population and reliance on imported energy priced in US dollars.
- After the intervention announcement, the dollar fell slightly against the yen but then rose again after Japan’s finance ministry statement.
- Bank of Japan may have spent nearly $59 billion to buy yen during the intervention, while the US might have spent between $5 and $10 billion.
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