Following comments from Japanese officials, Bessenter stood by, stating that he had discussed the "desirability" of a strong yen with the Japanese Finance Minister.

The yen rebounded strongly after falling for five consecutive trading days.

On Friday, September 25, Eastern Time, U.S. Treasury Secretary Bessenter posted on social media that he had a "productive call" with Japanese Finance Minister Satsuki Katayama that day. The two discussed "the desirability of a strong yen that reflects Japan's strong economic fundamentals" and emphasized the importance of continuing close communication on the foreign exchange market.

Bessant's statement further reinforces the signals recently released by US and Japanese officials regarding the yen exchange rate.

Bloomberg reported earlier on Friday that Satsuki Katayama revealed that Trump discussed the weakening yen with Japanese Prime Minister Sanae Takaichi this week, and Takaichi also told Trump that, in general, the yen being undervalued is "problematic."

Following the statements from the Japanese officials, the yen's gains widened, with the USD/JPY pair falling below 157.00 to 156.94 during the session, a daily drop of 1.2%, retreating from the high reached on Thursday, which broke through 159.00 and hit a level not seen since September 2.

US and Japanese officials have been sending a series of signals: from Trump and Kaohsiung to Bessant and Katayama.

Bessant said on Friday that the call with Katayama continued the talks Trump had with Sanae Takaichi earlier this week and demonstrated "the strength of the U.S.-Japan partnership."

He wrote on social media that the two sides discussed "the desirability of a strong yen that reflects Japan's strong economic fundamentals," while also emphasizing the importance of maintaining close communication in the foreign exchange market.

Judging from his wording, Bessant did not propose a specific exchange rate target, nor did he announce any new foreign exchange intervention measures. However, his direct use of the phrase "the desirability of a strong yen" indicates that the U.S. Treasury Department's concern about the yen's exchange rate continues.

Prior to Bessant's post, Japan had already sent a clearer signal.

Katayama Satsuki stated on Friday that Trump expressed concern about the weakening yen during his meeting with Takashi Sanae in New York this week; Takashi, in turn, told Trump that the yen's undervaluation was "problematic." Katayama also stated that, given the upcoming Japan-U.S. summit, she will continue to maintain close communication with Bessenter on a range of issues, including foreign exchange.

Bloomberg noted that the yen briefly became the strongest performing G10 currency after Japanese officials repeatedly discussed its weakening, rising as much as 1.2% during the session. This trend also reflects the market's renewed focus on the tolerance of US and Japanese officials for further yen depreciation.

It is worth noting that the publicly available information currently indicates escalating policy communication and intervention risks, not that the US and Japan implemented joint intervention again on Friday. Japan and the US previously conducted joint yen-buying intervention at the end of July. The market is currently focused on whether the US and Japan will take further action if the yen depreciates rapidly again.

Institutions: Intervention risks may cap the yen's decline.

Market participants are beginning to reassess the potential for further weakening of the yen.

OCBC strategist Moh Siong Sim said, "The risk of intervention should cap further yen weakness." More importantly, with Trump expressing concern about the yen's weakness, the yen may be approaching a turning point, as this could mean deeper coordination between the US and Japan to support the yen.

The yen has been under pressure recently, partly because the market has raised its expectations for further interest rate hikes by the Federal Reserve, which may keep the interest rate differential between the US and Japan at a high level; and partly because the market's assessment of the pace of subsequent interest rate hikes by the Bank of Japan has also limited the yen's support.

Bloomberg points out that market participants had previously viewed the 160 yen level as an area where the risk of Japanese intervention had significantly increased. Recently, sentiment in the yen options market has also shifted to a more bullish stance, reflecting increased investor demand for hedging against potential Japanese intervention in the foreign exchange market.

However, there are differing opinions in the market.

Bloomberg macro strategist Brendan Fagan believes that the latest statements from Japanese officials have not addressed two key issues: the Bank of Japan's policies remain significantly behind those of other major central banks, and structural carry trade demand persists in the market. He argues that the current strength of the yen is more of a reaction to policy signals, and its sustainability remains to be seen.

Whether the yen can hold its ground still depends on the US-Japan interest rate differential and policy path.

The yen's rebound is occurring against a sensitive backdrop.

During the previous five consecutive trading days of weakness, the USD/JPY pair once again approached the 160 level. Relatively strong US economic data, rising market expectations for further interest rate hikes by the Federal Reserve, and the continued rise in US Treasury yields all put pressure on the yen.

Meanwhile, the pace of future interest rate hikes by the Bank of Japan remains a key focus for the market. Although Japan continues to emphasize the issues of exchange rate volatility and the undervaluation of the yen, it remains uncertain whether verbal intervention alone can sustainably alter exchange rate trends should the US-Japan interest rate differential remain high.

Therefore, Friday's sharp rebound in the yen more directly reflects the market's repricing of the policy signal that "neither US nor Japanese officials want the yen to weaken excessively."

Going forward, the market will continue to focus on three variables: whether the Fed's interest rate expectations will continue to widen the US-Japan interest rate differential, whether the Bank of Japan will further signal an acceleration of interest rate hikes, and whether the "close communication" emphasized by the US and Japanese finance ministers will be further translated into concrete exchange rate policy actions.

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