Japan's Katayama says undervalued yen is problematic, agrees with Bessent on cooperation

The yen is the main read-through. Katayama's line that an undervalued yen is problematic, paired with her promise of close US Treasury contact, adds to verbal pressure on USD/JPY (around 157 in recent sessions) after August's joint intervention. Her denial that the government is reflationary and her stress on market-set rates may offer a little support to the yen and to JGB sentiment, but with no level or action mentioned, traders are likely to keep testing officials' resolve. --- Katayama kept to the familiar script of cooperation and communication, but her view that an undervalued yen is problematic keeps the pressure on USD/JPY. Summary Katayama said Japan and the US agreed to step up cooperation, when asked about her September 25 phone talks with Treasury Secretary Bessent. She said Japan will keep close communication with the US Treasury to help ensure orderly foreign exchange markets. She said an undervalued yen, in general, is problematic. She said Prime Minister Takaichi's administration is not reflationary and that interest rates are determined by markets. She said the ministry will communicate closely with bond market participants and conduct appropriate debt management policy. She said it will stay in close touch with market participants while maintaining a high sense of urgency. Japan's Finance Minister Satsuki Katayama said Tokyo and Washington agreed to step up cooperation, when asked about her September 25 phone talks with US Treasury Secretary Scott Bessent. She said Japan will keep up close communication with the US Treasury to help ensure orderly foreign exchange markets. Katayama also gave her view on the yen itself. She said that, in general, an undervalued yen is problematic. The comment follows the September 25 call, in which Bessent raised the desirability of a strong yen that reflects Japan's economic fundamentals, according to a summary of the exchange. It also comes after the joint US and Japanese yen intervention confirmed in early August.