BANFF, Alberta (Reuters) -U.S. Treasury Secretary Scott Bessent and Japanese Finance Minister Katsunobu Kato agreed on Wednesday that the dollar-yen exchange rate currently reflects fundamentals, the U.S. Treasury Department said.

"They reaffirmed their shared belief that exchange rates should be market determined and that, at present, the dollar-yen exchange rate reflects fundamentals," the department said in a statement.

Bessent and Kato met on the sidelines of the Group of Seven finance ministers gathering in Banff, Canada.

They discussed trade and currency issues, but as in their previous meeting in April, they did not discuss foreign exchange levels, according to the department.

Japan and the United States have agreed to keep the thorny issue of currency rates separate from direct trade negotiations, setting it aside for talks between their finance ministers.

President Donald Trump's focus on addressing the huge U.S. trade deficit and his past remarks accusing Japan of intentionally maintaining a weak yen have led to market expectations that Tokyo will face pressure to strengthen the yen's value against the dollar to give U.S. manufacturers a competitive advantage.