Trump raises weak yen in Takaichi summit, Katayama says; USD/JPY slips below 158.50

A US president expressing concern over the yen alters how markets should view intervention risks. Joint or US-backed yen support becomes easier to justify when Washington has publicly flagged the weak currency. This makes pushing USD/JPY above 159 and towards 160 more hazardous, even though the rate differential still supports the dollar. The relatively small 30-pip drop suggests traders need actual steps, not just remarks, before betting on yen strength. Katayama declining to rule out rate checks keeps that threat over the market. For AUD/JPY and other yen crosses, carry trades look more vulnerable to a sharp reversal if Tokyo acts.

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The weak yen now faces criticism in both Tokyo and Washington. Katayama's description of the Trump-Takaichi meeting, along with her unwillingness to discuss rate checks, keeps intervention risk prominent as USD/JPY trades below 160.

Summary:

• Katayama said Trump voiced unease about yen weakness during his meeting with Prime Minister Takaichi
• Takaichi told Trump that, broadly speaking, an undervalued yen is a problem
• Tokyo will work closely with Washington on currency issues
• Katayama would not comment on specific FX levels or rate checks
• She stated the BOJ's recent rate increase was meant to meet its inflation goal and that policy tools are for the BOJ to determine
• USD/JPY fell from roughly 158.70 to about 158.40 on the comments

US President Donald Trump expressed concern about the yen's weakness during his summit with Japanese Prime Minister Sanae Takaichi, Finance Minister Satsuki Katayama said on Friday. Her remarks add renewed political weight to the pressure on the currency. USD/JPY declined on the news, moving from around 158.70 to near 158.40.

Katayama said she had confirmed the details with the prime minister's office before relating the conversation. In her telling, Takaichi replied to Trump by stating that, as a broad principle, an undervalued yen is a difficulty. Katayama added that the prime minister had aired concerns about yen weakness in broad terms, and said Tokyo would coordinate closely with Washington on currency policy.

She would not discuss specific exchange-rate levels, or whether authorities had conducted rate checks: calls to dealers that markets often interpret as a warning preceding intervention.

Katayama also addressed the Bank of Japan's most recent rate rise, saying the increase was implemented to meet the central bank's inflation target. She said the specific instruments of monetary policy are for the BOJ to decide, but that she expects the bank to conduct suitable policy in coordination with the government.

The remarks are significant because they indicate the weak yen is now a mutual worry at the top levels in both Tokyo and Washington. That changes the environment for currency traders, who have long weighed the risk of Japanese intervention against the pull of large interest rate gaps. The US Treasury has already purchased yen this year as part of its efforts to manage rising borrowing costs. A US president voicing unease about the currency's weakness lowers the political hurdle to further joint action.

The comments also come against a shifting policy landscape in Japan. The BOJ raised its policy rate to 1.25% this month and flagged a new phase aimed at keeping inflation anchored at 2%. Goldman Sachs this week lowered its USD/JPY forecasts, citing quicker BOJ tightening and the threat of intervention among its reasons.

Even so, the market response was limited. With US 10-year yields above 5.2%, the interest rate gap still favours the dollar. Katayama's unwillingness to discuss levels or rate checks also leaves traders uncertain about how close Tokyo is to acting. The key question now is whether words from Washington and Tokyo will be followed by action if USD/JPY pushes back towards 160.