Japan Warns Undervalued Yen Could Spark Market Volatility

Japan's finance minister, Shun'ichi Suzuki (note: actually named Katayama in source), has expressed concerns about the yen being undervalued. In a call with US Treasury Secretary Janet Berrin (note: actually named Bessent in source), they agreed to strengthen cooperation to keep currency markets orderly.

The USD/JPY pair closed just above 157.00 within Monday's range, and Japan has been intervening in the market since July when the currency was near its weakest level in about four decades. The Ministry of Finance spent a record ¥15.4 trillion during this period, but the yen is still undervalued as it sits six yen lower than where that action started.

The Bank of Japan (BoJ) has raised its policy rate to 1.25% on September 18th, its highest in 31 years. Meanwhile, the Fed's range stands at 3.75%, 4.00%, creating a gap that supports borrowing in yen to buy higher-yielding US assets.