Why the Trump administration is helping support Japan’s weakening yen

The United States and Japan last week staged a coordinated intervention to halt the slide of the yen after the Japanese currency fell to a 40-year low against the US dollar.

While it is unusual for authorities to intervene to help prop up another country’s currency, the yen has an important role in international finance as the world’s third-most-traded currency, meaning its depreciation has repercussions far beyond Japan.

Here is everything you need to know about the currency intervention:

A currency intervention occurs when a government or central bank buys or sells large quantities of foreign currency to help stabilise the value of its own currency.

In this case, the US and Japan coordinated an intervention to lift the value of the yen after it slid to 163 against the dollar for the first time since 1986.

The intervention began on July 31 when the US Treasury began selling euros for yen, while Japanese authorities also bought yen.

In the days after the intervention, the yen began to rise and reached 157 to the dollar on Wednesday.

The US last staged a currency intervention with Japan in 2011 when the yen began appreciating rapidly following the Tohoku earthquake and tsunami.