The US Treasury Department said it will urge Japan to refrain from competitive devaluation while stopping short of accusing it of manipulating the yen in a report on exchange rates.

The Treasury will pressure Japan to adhere to international commitments "to remain oriented towards meeting respective domestic objectives using domestic instruments and to refrain from competitive devaluation and targeting its exchange rate for competitive purposes," the department said in its semi-annual currency report to Congress released in Washington on Friday. The report also declined to name China a currency manipulator.

"This is a shot across the BOJ's bow," Kit Juckes, a global strategist at Societe Generale SA in London, said in an e-mail. "Everyone still supports Japan's fight against deflation, but the United States would much rather the yen did not weaken significantly further."

The Bank of Japan surprised markets on April 4 by doubling monthly bond purchases to almost match the Federal Reserve's monetary easing, and by setting a two-year horizon for achieving its goal of 2 percent inflation. BOJ Governor Haruhiko Kuroda had earlier indicated that there's no time limit to the stimulus.

The Bank of Japan and Japanese Finance Ministry didn't answer phone calls by Bloomberg News.

The yen has depreciated against all 16 of its most-traded peers since April 4, declining 2.2 percent to the dollar, 3.5 percent to Europe's 17-nation common currency and 2.8 percent to Australia's dollar.

"Yen moves have been too rapid for the US to applaud Japan's battle to end deflation," said Yasuhide Yajima, chief economist at NLI Research Institute Ltd in Tokyo, an affiliate of Nippon Life Insurance Co, Japan's biggest life insurer. "Japan will have to show fiscal plans and means to strengthen growth to make it clear it's not depending only on weakening the yen to revive the economy."

The yen traded at 98.37 per dollar in Friday evening trade at New York, from 99.68 a day earlier. It lost 0.8 percent last week in its second five-day drop.

Juckes said until recently, the US had been supportive of Japan's policies. "How could they not be after years of calling for them to combat deflation?" Juckes said. "Now, with the yen falling so far, so fast, the Treasury has changed its tune."

Japan this month reached a deal with the US on bilateral trade issues that clears the way for the world's third-largest economy to join talks for the Trans-Pacific Partnership trade agreement as soon as July. The TPP would lower tariffs in countries that account for 40 percent of global trade.

The US is reiterating statements by the Group of Seven and Group of 20 that macroeconomic policies "should be directed at the domestic economy and not at the exchange rate," said Edwin Truman, a senior fellow at the Peterson Institute for International Economics in Washington.

The US will be "watching to make sure that the focus of Abenomics is on stimulating the domestic Japanese economy and not its external sector," Truman said, referring to the policies of Japanese Prime Minister Shinzo Abe.

The Treasury's statements about the yen are "about having some balance between Japan and China, said Domenico Lombardi, a senior fellow on global economics at the Brookings Institution in Washington. "The US doesn't want that its benign neglect about Japan is interpreted as a green light or relaxation for China to pursue exchange-rate devaluation."

(China Daily 04/15/2013 page14)