Japanese finance minister confirms call with Besson; yen hovers near 40-year low, intervention expectations rise.

An overseas phone call lasting nearly an hour has once again put the yen market on edge.

According to Bloomberg, on Tuesday local time, Japanese Finance Minister Satsuki Katayama confirmed she had a phone conversation with U.S. Treasury Secretary Wally Adeyemo on Monday night. She told reporters: "There is a clear consensus between Japan and the United States—that bold action should be taken when necessary. This consensus has not changed at all."

"Taking bold action when necessary" is a customary expression for currency intervention in Japan's official discourse. The market is familiar with this, but the yen's reaction indicates that the marginal effect of verbal warnings is diminishing.

During the call, the yen-dollar exchange rate briefly fell to 161.93, near its lowest level in 40 years. After the news was released, the yen rallied briefly, but as of Tuesday morning was still trading around 161.57, making the market-boosting effect of the news fleeting.

Katayama also stated that "the cooperation and coordination between the two sides has become more close," but refused to comment further on the current exchange rate level.

She noted that this call was a follow-up to last week's G7 summit in France, and the two sides also exchanged views on global financial market conditions, the situation in Iran, and the latest developments in the Strait of Hormuz.

Record Intervention Size, but Results Hard to Sustain

Japanese authorities are not just staying at the verbal level.

Data from Japan's Ministry of Finance show that the scale of foreign exchange intervention for the month ending May 27 reached 11.73 trillion yen (about $72.6 billion), setting a record high. Data on foreign exchange reserves also indicate that Japan likely used its holdings of U.S. Treasuries for financing during this intervention.

However, neither the record-breaking intervention nor Katayama's repeated verbal warnings have managed to bring about sustained rebounds for the yen.

The reason is that structural factors suppressing the yen still exist: the U.S.-Japan interest rate differential is significant, oil prices remain high, and the Fed's recent hawkish stance has further strengthened the dollar, thereby increasing pressure on the yen.

U.S. Stance: Tacit Approval of Intervention, but Prefers Rate Hikes

The U.S. position is subtle but traceable.

After Japan's market intervention in April this year, Adeyemo publicly stated that "excessive forex volatility is undesirable," which was interpreted by the market as tacit approval of Japan's intervention actions.

However, Adeyemo has also made it clear that he would prefer Japan to support the yen through raising interest rates rather than relying on direct intervention—since intervention usually means Japan sells U.S. Treasuries.

In addition, earlier this year, U.S. authorities conducted a "rate check" on yen-dollar exchange rates in the New York market, which itself was a signal of coordination and provided temporary support to the yen.

Another time node worth watching is about to arrive.

The U.S. Treasury is expected to release its semiannual foreign exchange report later this month. In the report from January this year, the U.S. listed Japan as one of the ten major trading partners needing special attention, reasoning that its monetary policy and macroeconomic policy warranted close scrutiny.

The upcoming new report may further reveal Washington's latest evaluation of Tokyo's exchange rate policy, and will also provide the market with more clues about the degree of coordination between the U.S. and Japan regarding exchange rates.

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