Tokyo and Washington Unite Against Undervalued Yen

Japan's Finance Minister Katayama has stated that an undervalued Yen is generally a problem, echoing concerns previously expressed by US Treasury Secretary Bessent. The two officials agreed to strengthen their cooperation in a call on September 25, with Japan pledging to maintain orderly currency markets.

The USD/JPY exchange rate closed at just above 157.00 on Tuesday, within Monday's range, despite the Yen being considered undervalued by Tokyo. This comes after Japan spent a record ¥15.4 trillion on Yen buying in July and August, with the Ministry of Finance (MoF) intervening to prop up the currency.

Market analysts believe that the BoJ may raise interest rates faster under US pressure, as hinted at by Vice Finance Minister for International Affairs Mimura's comments. The Bank of Japan has already raised its policy rate to 1.25%, its highest in 31 years, and may continue to do so if the Fed keeps raising rates.

The next key events include the release of August retail sales data on Tuesday, followed by the MoF's intervention figures for August 27-September 28 on Wednesday. The BoJ's summary of opinions from its September meeting will also be released on Wednesday, and Tokyo's consumer price index is due out on Thursday.