Key points: Sanae Takaichi said in an interview with a Japanese television network that she has raised the issue of the yen's undervaluation with U.S. President Donald Trump.

The yen was the best-performing G10 developed-market currency in the third quarter, yet it remains broadly weak.

Analysts said current market pricing reflects investor expectations that Japan may intervene in the currency market again.

After U.S.-joined efforts to prop up the yen produced weaker-than-expected results, Japan's prime minister said on Thursday that her government's policies will rebuild market confidence in the yen.

Sanae Takaichi told a Japanese television network that during a meeting with U.S. President Donald Trump last month, she raised the significant problem of the yen being undervalued.

"The goal of our economic policy is not to manipulate exchange rates," Takaichi said. "This government will carry out large-scale investment in crisis response and growth areas to strengthen the economy's supply capacity, thereby unlocking Japan's growth potential."

"These measures will enhance Japan's global competitiveness and in turn help the market build confidence in the yen."

USD/JPY real-time quote | Exchange 157.91, up 0.52 (+0.33%) Latest | 7:58 a.m. ET Add to watchlist

The yen's continued weakening has made things difficult for Japanese policymakers. Deutsche Bank data showed that joint U.S.-Japan market intervention to support the yen, combined with the Bank of Japan's 25-basis-point rate hike in September, helped the yen become the best-performing G10 currency in the third quarter, with the yen appreciating 3.3% against the dollar during the quarter.

At 5:57 a.m. ET on Thursday, USD/JPY was at 158.37. Although the exchange rate has pulled back from a high above 163 in late July, it is still up about 7.65% from a year earlier (meaning the yen has depreciated year on year).

Societe Generale chief FX strategist Kit Juckes wrote in a research note on Wednesday: "The market widely expects that Japan is very likely to intervene again in the USD/JPY exchange rate in the near term, and current market pricing shows investors do not want to suffer losses from a sudden intervention."

"But if oil prices surge again, it could easily reverse the recent improvement in risk sentiment, so the market still needs to remain cautious," he added.

OCBC research FX strategists Shen Mengsong and Huang Zhuoqin said in a Monday report: "Although the yen's valuation is already at a low level, this has not effectively eased depreciation pressure."

"Although the deterrent of another intervention can prevent disorderly yen depreciation, without accompanying domestic policy adjustments, currency market intervention alone will struggle to achieve a sustained rebound in the yen."

The yen's weakness troubles Japanese policymakers. A weaker yen raises Japan's import costs and pushes up overall inflation. Critics argue that Sanae Takaichi's fiscal spending plans are a factor weighing on the yen and driving up government bond yields.

U.S. policymakers are also believed to be concerned about yen weakness, because continued yen depreciation could force Japan to sell its holdings of U.S. Treasuries. U.S. Treasury Department data show Japan is the largest overseas holder of U.S. debt, holding more than $1.1 trillion in U.S. debt.

Takaichi said the scale of Japanese government fiscal spending will remain consistent with the goal of reducing government debt as a share of GDP, while bond issuance will be "moderately controlled."

"We will secure the funds needed for fiscal spending and meet various fiscal needs," she added.