Washington: The United States removed Japan from its foreign exchange policy monitoring list in a semiannual report released by the Treasury Department on Friday.

The removal came after the department found that Japan has not continuously intervened in the foreign exchange market and that the Asian country’s current account surplus with the United States has shrunk.

It is the first time that Japan is not on the monitoring list since the U.S. government began such designations for its trading partners in 2016.

Still, a senior official of the department issued a warning to Japan, saying that foreign exchange intervention should be carried out only in very exceptional circumstances after appropriate prior consultation.

The report noted that Japan conducted yen-buying, dollar-selling market interventions last autumn to “reduce recent heightened volatility of the yen,” following the Japanese currency’s rapid weakening.

According to the official, the department concluded that Japan was not intervening in the foreign exchange market on a continuous basis and that the size of its recent interventions was below certain criteria.

The U.S. government began designating countries and regions over their foreign exchange policies at the request of the Congress, which was frustrated with massive trade deficits.

The department designates a trading partner as a sanctionable currency manipulator if it meets all three conditions–a significant bilateral trade surplus with the United states, a large current account surplus, and persistent and unilateral foreign exchange intervention. Those that meet two of the three conditions are placed on the monitoring list.

Japan had been placed on the monitoring list due to its trade surplus with the United States and its current account surplus.

In the latest report, China was kept on the monitoring list. The country was regarded as an “outlier” as it does not publish foreign exchange intervention data.

South Korea, Germany, Malaysia, Singapore, Taiwan and Switzerland were also on the monitoring list, while no country or region was designated as a currency manipulator.

JIJI Press