TOKYO: The yen was headed for its best day in almost three weeks as Japanese officials discussed the problems tied to a weak currency in meetings with their US counterparts.
The currency strengthened as much as 1.2%, the most since Sept 7, to 156.94 per dollar last Friday, outperforming all of its Group-of-10 peers.
Prime Minister Sanae Takaichi said that an undervalued currency is “problematic” in a meeting with US President Donald Trump, adding to traders’ caution over the risk of interventions to buoy the currency.
Treasury Secretary Scott Bessent, meanwhile, said he discussed “the desirability of a strong yen” with Japanese Finance Minister Satsuki Katayama.
“Intervention risk should put a ceiling on further yen weakness,” said Moh Siong Sim, a strategist at Oversea-Chinese Banking Corp.
“More importantly, the yen may be nearing a turning point as Trump’s concerns over its weakness point to deeper US-Japan coordination to support the currency.”
The yen has recently come under renewed pressure as expectations for further Federal Reserve rate increases threaten to keep the US-Japan interest-rate gap wide.
Uncertainty over how quickly the Bank of Japan (BoJ) can continue tightening has also weighed on the currency, this week pushing it closer the key 160-per-dollar level.
While officials have emphasised the speed and disorderliness of currency moves rather than any specific exchange-rate level, market participants have viewed the area around 160 as where intervention risk rises.
Options sentiment toward the yen turned more bullish lately, reflecting increased hedging demand against the risk of Japanese intervention.
Leveraged traders trimmed back their bullish positions on the yen in the week ending Sept 22, according to Commodity Futures Trading Commission data released last Friday.
They’d turned positive on the currency for the first time since mid-2025 a week earlier.
Japan and the United States carried out their first coordinated yen-buying intervention since 1998 this summer after the currency weakened beyond 160.
Japan spent a record 15.4 trillion yen (US$97.4bil) intervening in the month through Aug 26, according to Finance Ministry data.
“Japanese officials’ latest comments do nothing to address the two major elephants in the room: The BoJ lags its peers considerably, and there is still structural appetite for carry.” — Bloomberg
