Japan's finance minister Kato plans FX discussions with US amid USD/JPY drop

USD/JPY has retreated from earlier highs, prompted by comments from Japan's finance minister Shunichi Kato signaling his intention to discuss currency-related matters with US Treasury Secretary Bessent this week. The pair's pullback suggests that traders are cautious about potential verbal interventions or policy actions aimed at stemming the yen's rapid depreciation. However, the effectiveness of such discussions remains uncertain, given the diverging monetary policy stances between the Bank of Japan and the Federal Reserve. USD/JPY may find support at the 135.80 level, which aligns with the 38.2% Fibonacci retracement of the recent rally. A bounce from this support could see the pair retest the session high at 136.45. Conversely, a break below support might expose the 135.00 psychological level.