The U.S. Treasury Department said Friday it has removed Japan from a list of major trading partners that it monitors for potentially unfair foreign exchange practices for the first time since 2016, when the current format of designation began.
In its biannual report to Congress, the department placed seven economies on its "monitoring list" — China, Germany, Malaysia, Singapore, South Korea, Switzerland and Taiwan.
While Japan carried out foreign exchange interventions in September and October last year in an attempt to stem the yen's rapid depreciation against the U.S. dollar, a Treasury official said in a press briefing there was no need to continue listing the country as one of the criteria employed is "the persistence of an intervention."
The official warned, however, that interventions should only be conducted in "very exceptional circumstances" after consultations with other countries.
The department did not designate any trading partner as a currency manipulator, which could result in the imposition of U.S. sanctions.
But it said China must be monitored closely, noting in the report that Beijing's lack of transparency regarding key features of its foreign exchange system makes it "an outlier among major economies."
For the list, the department uses three criteria to assess whether a country has manipulated its foreign exchange rates to gain an unfair trade advantage.
The three are the size of any trade surplus with the United States, the size of any current account surplus as a share of gross domestic product and the extent of intervention in foreign exchange markets.
In the report, covering developments in 2022, the department said Japan had not met two of the three criteria for two consecutive reports, meaning it could be removed from the list.
The one remaining criterion was Japan's huge trade surplus with the United States.