USD/JPY fell to 157.00 from 157.75 after fresh undervaluation talk from a variety of officials.
This is the second round of jawboning today. Earlier, Katayama took the unusual step of disclosing that Trump raised the weak yen with Takaichi at their UN meeting this week, and that Takaichi told him, “as a general principle,” that an undervalued yen is a problem. That got about 30 pips. Katayama then added that she and Bessent “reaffirmed the point that the undervaluation of the yen is a problem” and that she expects the “excessive” yen selling to be corrected. She even suggested the market “misunderstood” something.
Escalating Language, Familiar Phrasing
The language itself is not new. “Substantial undervaluation” has been Treasury’s phrase since the July 31 joint intervention, when USD/JPY was near 164. What is notable is the escalation in who is saying it. The message now reaches from finance ministers up to the leaders, and Tokyo chose to make a private summit exchange public — a move that looks coordinated.
Rate Gap Remains the Core Problem
The broader context matters. The joint intervention took the pair from 163.73 to the mid-150s. Two months later, the market has taken back a good chunk of that move because the rate differential still pays traders to be short yen. Officials are trying to stop the slide before it becomes a retest of the highs. With reports of rate checks and both governments on record, it is a game of chicken right now. The US has already shown it will put its own balance sheet on the other side of the trade, but whether that is enough to make a lasting dent remains an open question.
The deeper issue is that the BOJ has already done what Washington asked. It hiked to 1.25% last week — a faster pace than before, with Bessent openly pushing for it — and USD/JPY barely responded. That is why leaders are now being brought out publicly. Intervention and jawboning buy time, but with the rate gap still wide, a sustained move below 155 likely requires the BOJ to signal that the next hike is coming sooner than the market currently expects.
