USD/JPY dropped to 157.00 from 157.75 after a second round of official warnings on yen weakness in a single day. Japan's Katayama disclosed that Trump raised the weak yen with Takaichi at this week's UN meeting, then said she and US Treasury Secretary Bessent had reaffirmed that the currency's undervaluation is a problem.
USD/JPY slid to 157.00 from 157.75 as officials in Washington and Tokyo escalated their warnings on yen weakness for the second time today. Katayama first disclosed that Trump had raised the weak yen with Takaichi at their UN meeting this week, and that Takaichi told him, as a general principle, an undervalued yen is a problem — a disclosure that moved the pair about 30 pips.
She then said she and Bessent "reaffirmed the point that the undervaluation of the yen is a problem", adding that she expects the excessive yen selling to be corrected. The finance minister also suggested the market had misunderstood something, though she did not specify what.
Officials escalate the same message
The language itself is not new. Treasury has used the phrase "substantial undervaluation" since the July 31 joint currency intervention, when USD/JPY traded near 164. What has changed is who delivers the message: it now runs from finance ministers up to national leaders, and Tokyo chose to make a private summit exchange public.
That intervention pulled the pair from 163.73 to the mid-150s. Two months on, though, the market has clawed back a good part of that move because the rate gap between the US and Japan still rewards the yen carry trade. Officials now appear to be trying to stop the slide before it retests the earlier highs.
The BOJ has already moved once
The complication is that the Bank of Japan has already done what Washington asked. It hiked its policy rate to 1.25% last week, a faster pace than before and with Bessent openly pushing for the move — yet USD/JPY barely reacted. That is why national leaders are now being drawn into the messaging.
Intervention and jawboning can buy time. But with the rate gap still wide, a sustained move below 155 likely needs the BOJ to signal that its next hike is coming sooner than markets currently expect.
Source: Investinglive
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