• Finance Minister Satsuki Katayama said Treasury Secretary Scott Bessent reaffirmed that the yen's substantial undervaluation is a concern.
  • The comments, which came after President Trump raised the issue with Prime Minister Sanae Takaichi, sent the yen up as much as 0.6% to ¥157.95 per dollar.
  • Traders are watching the psychologically important ¥160 level, with the prospect of further joint intervention growing.

Japan and the United States are signaling an unusually explicit alignment on currency policy, with Finance Minister Satsuki Katayama saying Treasury Secretary Scott Bessent reaffirmed that the yen's substantial undervaluation is a matter of concern. The disclosure on September 25 reinforces the prospect of continued coordination between the two allies—through policy communication and potentially market action—to curb disorderly yen weakness.

Katayama said she would remain in close communication with Bessent on foreign exchange and other issues. The public airing of leaders' currency discussions is notable because such talks are normally handled privately. The remarks followed President Donald Trump's meeting with Prime Minister Sanae Takaichi in New York, where Trump raised concern about the weak yen. Takaichi reportedly responded that an undervalued yen is problematic "as a general principle."

The yen strengthened after the comments, at one point gaining about 0.6% to ¥157.95 per dollar, as traders reassessed the likelihood of official action around the psychologically important ¥160-per-dollar level. The immediate background is the July 31 coordinated U.S.–Japan yen-buying intervention—the first such joint action in roughly 28 years—which sought to counter the currency's slide. Officials have not ruled out further cooperation.

The central economic driver is the large U.S.–Japan interest-rate differential. Higher U.S. yields make dollar assets relatively more attractive, while Japan's lower-rate environment has historically encouraged investors to sell yen and buy higher-yielding foreign assets. Katayama previously attributed Bessent's view of yen undervaluation largely to that rate divergence.

A weak yen has competing effects. It raises the yen cost of imports for Japanese households, intensifying cost-of-living pressure, while generally boosting the yen value of overseas revenue for Japanese exporters. U.S. manufacturers can face a tougher competitive environment if Japanese products become cheaper in dollar terms—a politically sensitive issue for the Trump administration.

The market's central question is not merely whether the yen trades at a given level, but whether the move is rapid, speculative, and disorderly. Bessent said in late August that recent moves had been "pretty well contained," while Japanese authorities have retained discretion to judge whether intervention is warranted.

Policy Dilemma

Tokyo wants to limit import-driven inflation and public discontent from a weaker yen, but a sharper currency could hurt exporters and financial conditions. The Bank of Japan (8301.T) must also manage inflation expectations and domestic growth rather than simply target an exchange-rate level. Bessent has publicly supported "decisive" Japanese market and monetary steps to address the yen's substantial undervaluation, specifically linking yen weakness to Japanese inflation pressure and encouraging policy that avoids excess exchange-rate volatility. His discussions with BOJ Governor Kazuo Ueda added pressure for Japan to use monetary policy—not only intervention—to support a stronger, more stable currency.

The cooperation is significant because Washington has often been wary of currency intervention. Its willingness to coordinate with Tokyo reflects shared concerns over market instability, Japanese inflation, and bilateral trade competitiveness. The two sides have repeatedly affirmed that orderly yen movement supports global financial stability.

The weak-yen issue has roots in the long period of ultra-easy Japanese monetary policy associated with the post-2013 Abenomics era. The U.S. Treasury has noted that Japan's conditions are materially different from those twelve years ago, emphasizing the importance of credible monetary-policy formulation and communication to anchor inflation expectations. The recent episode intensified as the yen fell to around ¥164 per dollar before the late-July coordinated intervention, according to reporting on the negotiations behind that action. Historically, Japan has intervened unilaterally at times of extreme volatility, but direct coordinated dollar-selling/yen-buying with the United States is rare—making the July action and the current political messaging especially consequential.

Near term, the remarks increase the market impact of any future statements from Katayama, Bessent, the BOJ, or the Prime Minister's Office. They may discourage speculative yen selling, especially as dollar-yen nears ¥160. However, verbal intervention alone may have limited durability if U.S. yields remain high and the interest-rate gap stays wide. The most likely immediate path is tighter Japan–U.S. communication, verbal pressure on markets, and careful monitoring of volatility. Further yen-buying intervention becomes more plausible if the yen weakens abruptly or moves appear one-sided and disorderly, rather than merely depreciating gradually. A more durable yen recovery would likely require firmer expectations of additional BOJ normalization or narrowing U.S.–Japan yield differentials. Bessent has explicitly supported monetary steps alongside market action.

Related recent developments include Katayama and Bessent's August meeting, when they agreed that orderly yen movements were vital for global market stability, and Bessent's subsequent meeting with BOJ Governor Ueda, where he backed decisive action against yen undervaluation.