[TOKYO] US policymakers are "pretty clear" in their views that Japan should refrain from any steps to intentionally weaken the yen, such as intervention in currency markets, a key economic adviser to Prime Minister Shinzo Abe said on Wednesday.
Japanese financial authorities thus face a tough situation, with few options to contain unwelcome yen rises, said Koichi Hamada, an emeritus professor at Yale University who has close contacts with senior US and Japanese policymakers.
"US authorities have been pretty clear in their views that they don't want Japan to do anything to weaken the yen further," Mr Hamada told a seminar in Tokyo after having met several senior policymakers in the United States.
"For Japan, it would be a choice of enduring (unwelcome yen rises) a bit longer, or intervene in the market," knowing that doing so could anger the United States, he said.
Japanese policymakers have escalated their verbal warnings to investors against pushing up the yen too much, with the finance minister saying Tokyo will intervene if "one-sided" yen rises last long enough to hurt the economy.
While US officials have not issued direct, public warnings to Japan urging it to refrain from currency intervention, a US Treasury Department report released this month added Japan to a list of countries it was monitoring currency policy.
Mr Hamada, a special adviser to Mr Abe's administration, told Reuters on Tuesday that Japan will intervene in the currency market if the yen strengthens to 90-95 per dollar, even if that upsets the United States.
The slew of verbal jawboning has helped pushed up the dollar, which stood around 108.60 yen on Wednesday.
The yen rose to an 18-month high against the dollar last week and is up around more than 10 per cent so far this year.