(Bloomberg) -- The risk of intervention to support the yen remains alive and well despite a warning shot from the US about Japan’s foreign-exchange practices, strategists said. 

The US Treasury Department on Thursday added Japan to its so-called “monitoring list” for forex practices, though it stopped short of labeling it a currency manipulator. On Friday, Japan’s top foreign-exchange official Masato Kanda stressed that there’s been no change to his stance to take appropriate measures in the event of excessive FX moves.

While the warning has captured the attention of market participants, most are concluding that it may do little to stymie official efforts to prop up the yen if the currency continues falling unchecked. The yen is inching ever closer to the 160.17 per dollar level around which officials are suspected to have intervened earlier this year, stoking speculation of increased risk of intercession. 

The yen traded little changed at 159.02 per dollar at 9:13 a.m. in New York, after declining for six sessions.

“It’s not an issue at all to intervene,” Wei Liang Chang, macro strategist at DBS Bank Ltd. said of the report’s impact. “The US Treasury is concerned only if there are large FX purchases to weaken the currency, while Japan is doing the opposite by supporting the yen.”

Japan’s currency has fallen more than 11% this year, the biggest loser by far among Group-of-10 peers against the dollar as investors abandoned the yen for higher-yielding alternatives. Even firming prospects of Federal Reserve rate cuts have failed to daunt short-sellers betting there’s little Japan can do to truly bridge the gulf in rates with the US. 

While the Treasury pointed out that Japan had delved into markets to support the yen earlier this year, it took aim instead at Tokyo’s large bilateral trade and current account surpluses. Japan joins countries including China, Germany, Malaysia and Singapore on the monitoring list. 

“It seems that intervention wasn’t the main reason, it was more because of Japan’s current account condition,” said Juntaro Morimoto, a senior currency analyst at Sony Financial Group Inc. 

It doesn’t appear that opposition to intervention is necessarily growing, Yujiro Goto, chief currency strategist at Nomura Securities Co., said in a report. He said that next threshold might be around the 161 level, based on previous comments from Kanda.  


Angst among Japanese officials have been mounting as the yen hovers around half the value it was in 2012, spurring repeated threats of intervention.

Some strategists including Rodrigo Catril at National Australia Bank Ltd. believe the Treasury’s announcement ramps up pressure on Tokyo, reflecting “discontent” from the US.  

But Carol Kong is among those expecting intervention risks to remain live, even if officials opt for more aggressive verbal warnings before resorting to actively buying the yen for now. 

“I don’t think the US Treasury’s report would do much to prevent Japan’s MOF from intervening again if the depreciation in the yen accelerates rapidly,” said Kong, a currency strategist at Commonwealth Bank of Australia. 

--With assistance from Carter Johnson, Saburo Funabiki and Cristin Flanagan.

(Updates yen price in fourth paragraph.)

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