THE US dollar plummeted against the Japanese yen on Monday after President Donald Trump and Japanese Finance Minister Satsuki Katayama confirmed that both countries had intervened in the markets.

Before late last week, the dollar was trading above 163 yen, touching 40-year highs. After regulators were suspected of stepping in, it fell below 160 yen.

Early on Monday, following the official announcement of the intervention, the dollar dropped about 1 per cent to 156.34 yen. That’s a big change for the exchange rate.

The yen’s prolonged weakness against the dollar has been a source of frustration for Tokyo. Since Japan imports so much of what it consumes, a weak currency pushes prices higher, increasing inflation.

Japan also faces other problems, including a sharp slide in its working age population, low productivity and a heavy reliance on energy imports that are priced in US dollars.

Last week, the US was suspected of lending a hand. When asked why Washington was helping, Mr Trump said on Sunday: “We have a good relationship with Japan. We’re very strong —- very, very strong financially — and they are, you know, they have a weakening yen and they wanted a little bit of help and we’re always there for Japan. 

“Japan’s been very good to us — with the exception, of course, of Pearl Harbour.”

Mr Trump said the US gained “financial benefit” from the intervention, calling it a “signal of friendship” and adding: “It’s also good for the world economy.”

In Tokyo, Ms Katayama issued a statement confirming the intervention, saying that her ministry had purchased yen in co-ordination with the US Treasury Department.

The action “countered excessive volatility and disorderly movements in the Japanese yen in recent months,” it said.

It added that the ministry would not hesitate to act further if necessary.