One hundred and sixty-three yen to one US dollar. That was the Japanese currency's lowest value since 1986 - four decades back. Then came a move the markets had not seen in a long time: Japan and the United States jointly intervened on the foreign exchange market to halt the slide.

After the action the yen strengthened sharply to around 155.2 to the dollar, then settled around 156 to 157. Japan's finance ministry confirmed it had bought yen on 31 July in coordination with the US Treasury, which in turn bought through the Federal Reserve Bank of New York. The aim, according to Japanese authorities, was to prevent excessive volatility and disorderly exchange rate movements.

The last time was after the 2011 tsunami

This is the first coordinated action of its kind since 2011, when the two countries intervened after the devastating earthquake and tsunami that hit eastern Japan. Back then the goal was the opposite - the yen was strengthening sharply because investors expected Japanese companies to repatriate funds to finance reconstruction, so the G7 countries intervened to stop it.

Same instrument, opposite goal. Fifteen years ago they were fighting a yen that was too strong. Now they are fighting one that is too weak.

Japan's finance ministry and US Treasury Secretary Scott Bessent said they would not hesitate to take joint steps again should the need arise.

The cause is a single number

The interest rate gap. The Bank of Japan raised its base rate to one percent in June - the highest level since 1995. The US Federal Reserve's benchmark rate sits between 3.50 and 3.75 percent.

That is the gap that has, year after year, drained capital towards US financial markets and made the Japanese currency unattractive to international investors. On top of that, Japan's economy faces a shrinking workforce, low productivity and heavy dependence on energy imports priced in dollars. A weak currency makes those imports more expensive, fuels inflation and lowers living standards.

Why intervention works at all

The mechanism is simpler than it sounds. When a central bank wants to strengthen its own currency, it sells dollars from its reserves and buys its own. Demand rises, value climbs. If another major central bank does the same, the effect is far stronger.

That is exactly why Washington's participation matters. A unilateral Japanese intervention can halt a fall temporarily, but it rarely turns a trend. When the US Treasury stands behind the action too, investors get the message that the two largest economies share an interest - and that is enough for speculators to close their positions against the yen.

Many economists are reminded here of the 1985 Plaza Accord, when the finance ministers and central bank governors of the US, Japan, West Germany, France and the UK agreed to weaken the dollar in coordinated fashion. Over the following two years the dollar lost around a third of its value against the yen and the German mark. It remains the best-known example of how coordinated action can change the course of global currency markets.

The moves reflect both countries' intent to stop a wave of selling in the yen and Japanese government bonds from turning into a wider shock to the global economy - which, among other things, could also raise Washington's own borrowing costs. Analysts warn this may be only the beginning of a broader strategy if the yen again approaches record lows.