Japanese markets open the week with the yen having pulled back modestly from Tuesday's 40-year low, but the underlying pressures that drove it there remain firmly in place, keeping intervention risk on the table for the session(s) ahead. The combination of a still-weak currency, rising import costs and a fresh 30-year high in benchmark JGB yields points to a market pulled in two directions: relief from softer US data on one side, and mounting unease over fiscal spending plans and bond market resistance on the other. Traders will likely stay alert to any fresh verbal intervention from Tokyo, while the divergence between the finance ministry's fiscal reassurances and signs of internal unease over BOJ policy coordination could keep both the yen and JGBs volatile into the new week.The yen steadied near 161.2 per dollar after a 40-year low, with Japan's Katayama reaffirming close contact with Washington on FX, as rising bankruptcies and a 30-year high JGB yield keep pressure on policymakers heading into the new week.Summary:The yen traded at 161.2 per dollar on Friday, recovering from a 40-year low of 162.84 hit on Tuesday, helped by broad dollar weakness after a weaker-than-expected US jobs reportFinance Minister Satsuki Katayama said Tokyo remains in regular contact with Washington on FX issues and is ready to respond appropriately at any time, including when the US is on holidayBankruptcies linked to the weak yen totalled 45 in the first half of the year, up 32.3% from a year earlier, with wholesalers facing the sharpest squeeze from higher import costsJapan's tax revenue hit a record 84.2 trillion yen in fiscal 2025, 3.5 trillion yen above forecast, yet failed to calm investor nervesThe benchmark 10-year JGB yield hit a 30-year high on Friday as investors read Prime Minister Sanae Takaichi's economic blueprint as paving the way for substantial new spending and resistance to further BOJ rate hikesKatayama pushed back on suggestions of a policy shift, while an economic aide to the premier called for moderate BOJ rate hikes to help correct excessive yen weaknessJapan heads into the new week with its currency pulled back from multi-decade lows but the pressures behind that weakness still very much intact, after Finance Minister Satsuki Katayama renewed her warning to markets on Friday that Tokyo stands ready to intervene if needed.The yen traded at 161.2 per dollar on Friday, recovering from a 40-year low of 162.84 hit earlier in the week, as broad dollar weakness following a softer than expected US jobs report pushed back market expectations for imminent Federal Reserve rate hikes. Katayama said her government's stance had not changed and that Japan would respond appropriately at any time, adding that Japanese and US authorities remain in close contact on foreign exchange issues even when American markets are closed for holidays. A sudden jump in the yen on Thursday had put traders on alert for possible intervention, though most concluded the move was too small to represent an official operation.The currency's prolonged weakness is inflicting real damage on Japan's corporate sector. A report from Tokyo Shoko Research showed bankruptcies linked to the weak yen reached 45 in the first half of the year, a 32.3% jump from the same period last year, with wholesalers facing particular strain from higher import costs for materials and goods amid limited pricing power. The research house warned such bankruptcies are likely to stay elevated for the foreseeable future. Katayama, asked about the trend, said the government intends to press ahead with measures to revitalise private-sector activity.Fiscal dynamics are adding a further layer of complexity heading into the week. Japan's tax revenue hit a record 84.2 trillion yen in fiscal 2025, 3.5 trillion yen above the government's forecast and a sixth consecutive annual record, yet the strong haul did little to ease investor unease. The benchmark 10-year JGB yield climbed to a 30-year high on Friday as markets interpreted Prime Minister Sanae Takaichi's economic blueprint as a signal of substantial new spending and resistance to further Bank of Japan rate hikes, with the blueprint explicitly framing close coordination between the government and the central bank as essential to strengthening the economy.Katayama rejected any suggestion of a policy shift, arguing the blueprint simply reaffirmed the government's existing position and stressing continued commitment to maintaining market confidence in Japan's fiscal health. But cracks in that unified front are becoming more visible, with Toshihiro Nagahama, an economic aide to the premier and a former advocate of loose fiscal and monetary policy, calling this week for moderate BOJ rate hikes to help correct excessive yen weakness and contain further yield spikes. That tension between fiscal expansion and monetary tightening is likely to remain a central theme for traders watching both the yen and JGB markets as the new week gets underway. This article was written by Eamonn Sheridan at investinglive.com.