Why America and Japan Are Worried the Yen Is Too Cheap
Japan Finance Minister Satsuki Katayama and U.S. Treasury Secretary Scott Bessent agreed on Sept. 25 that the yen is priced too low against the dollar and that is a concern. Ministry of Finance
Think of the exchange rate as a price tag. It tells you how much Japanese money buys in American money. Undervalued means that price looks too cheap for how strong Japan's economy is.
Bessent later said he and Katayama talked about wanting a stronger yen that matches Japan's strong economic basics. Bloomberg That wording is stronger than what they said after their Aug. 31 meeting. Then, Japan's finance ministry said keeping yen moves calm is needed to keep world markets stable.
That Aug. 31 meeting ended with a promise to keep working together for calm yen moves. Reuters After a May 12 meeting, they had already agreed that big, jumpy swings in currencies are unwanted. The September statement keeps the teamwork promise but adds a clear view on direction. It says the yen should be stronger.
The number to watch is 160. On Aug. 31, a dollar bought 159.75 yen, very close to 160. That line is seen as raising the chance Japan will buy yen to support it. Reuters That same day, Bessent said he thinks Japan will act to make the yen stronger. The yen had briefly slipped to about 161.9 late on a Monday, as reported on June 22. That June report said Japan spent a record 11.7 trillion yen ($72.44 billion) stepping into the market.
The U.S. has also pushed Japan on spending and interest rates. Sources said Bessent often asked Japan to borrow and spend less and to have the Bank of Japan raise rates. Rates are the cost of borrowing money. Reuters After the May meeting, Katayama would not say if Bank of Japan policy came up with Bessent. Japan also said President Donald Trump told Prime Minister Takaichi he is worried about a weak yen. Reuters
The September call was part of regular contact. Bessent told Katayama he has strong trust in the U.S.-Japan alliance, according to an Oct. 28, 2025 U.S. Treasury note. He held a finance ministers meeting that included Katayama on Jan. 12. He thanked Katayama for Japan's lead on energy and money issues after April 16 talks, according to Treasury notes on those meetings.
The broader context here is a change from talking about process to talking about price. Calm moves and unwanted swings are normal group language. They call for steady markets without naming a level. Saying the yen is undervalued and should be strong leaves Tokyo less room to accept a weak yen. It also links the yen to budget discipline and higher home rates.
In my view, traders will read this as joint cover to act near 160, not as an exact trigger. The 159.75 price on Aug. 31, the earlier slip near 161.9, and the record spending set the zone without drawing a hard line. Working for calm moves leaves choice on timing and tool, whether finance ministry buying, Bank of Japan action, or budget signals. The risk is one-sided. More weakness could bring a joint statement and then action. Strength that fits the economy brings no pushback.
