Japan's prime minister says her policies will boost confidence in the yen after U.S. intervention falls short

Japan's Prime Minister said on Thursday that her government's policies will lift market confidence in the yen, after previous efforts to boost the currency, including U.S. intervention, underwhelmed.

Sanae Takaichi told Nippon Television, in comments translated by Reuters, that she told U.S. President Donald Trump that the currency's undervaluation was a problem when the pair spoke last month.

"Our economic policy is not aimed at manipulating exchange rates," Takaichi said.

 "My administration aims to boost Japan's growth potential by increasing the economy's supply capacity through bold investment in crisis management and growth areas."

"Such efforts would strengthen Japan's global competitiveness, thereby helping ensure market confidence in the yen."

A joint U.S.-Japan intervention to support the yen, along with the Bank of Japan's 25 basis point September rate hike, helped make the yen the G10's top-performing currency in the third quarter, adding 3.3% against the dollar, according to Deutsche Bank data.

The dollar traded at 158.37 yen, as of 5.57 a.m. ET Thursday, down from a peak above 163 in late July but up by around 7.65% over the last year.

Societe Generale's chief FX strategist, Kit Juckes, wrote in a Wednesday note that there is "a strong market perception that further USD/JPY intervention is likely in the near future," with current pricing reflecting investors' "reluctance to be caught out by intervention."

"Another spike in oil prices could easily reverse the recent improvement in risk sentiment, however, and caution still seems warranted," he added.

FX strategists at OCBC Group Research, Sim Moh Siong and Christopher Wong, said in a Monday note that the yen's "cheap valuation has done little to ease depreciation pressures."

"While the threat of further intervention should limit disorderly depreciation, intervention alone is unlikely to deliver a sustained recovery without support from domestic policy changes," they added.

The yen's weakness has pushed up Japanese import costs and broader inflation, with Takaichi's spending plans blamed by critics for pressure on the currency and higher bond yields.

U.S. policymakers are thought to be concerned about yen weakness as it could prompt Japan to sell down its Treasury holdings.

Japan holds the largest share of Treasurys among foreign buyers, according to the Treasury Department, with more than $1.1 trillion of U.S. debt.

The Japanese government will set spending at levels consistent with lowering Japan's debt-to-GDP ratio and "appropriately manage" the size of bond issuances, Takaichi said.

"We will secure funding in responding to fiscal needs," she added.