Japan's currency diplomat says Tokyo in constant FX dialogue with US

By Tetsushi Kajimoto and Leika Kihara

TOKYO (Reuters) -Japan's top financial diplomat Masato Kanda said on Tuesday authorities were in close contact with U.S. Treasury Secretary Janet Yellen and other overseas officials "almost every day" on currencies and broader financial markets.

The remarks likely signal Tokyo's desire to keep market players on guard about the possibility of currency intervention to prop up the Japanese yen, which has been hovering near the 145-per-dollar level, seen as authorities' line-in-the-sand on the currency.

"We are exchanging views with and communicating with authorities in other countries including our ally the United States not only on currencies, financial markets but various other issues," Kanda told reporters.

Finance Minister Shunichi Suzuki confirmed Tokyo and Washington were in close contact with each other on currency moves, but declined to reveal what was being discussed.

"I have nothing additional to say beyond what I've said previously," Suzuki told a news conference on Tuesday, when asked about the speed of the yen's recent declines.

Notably, Suzuki stopped short of escalating his verbal warnings by avoiding comments such as "deeply concerned about weak yen" or ready to take "decisive step" in the currency market - phrases he used previously just before last year's intervention.

On Friday, Suzuki warned against "sharp and one-sided moves" in the currency market.

He also said Japan will take appropriate steps should the yen weaken excessively, after the currency fell past the 145 to the dollar threshold - a level around which Japan conducted its first yen-buying intervention in 24 years last September. Beyond that level, some market players see 150 yen as a new threshold.

"It looks like authorities are less cautious about the weak yen compared with last year when they stepped into the market," said Masafumi Yamamoto, chief FX strategist at Mizuho Securities.

"150 yen could be a trigger," Yamamoto said, adding that factors such as the weak yen's boost to exporters' earnings and the stock market suggest intervention may not be imminent.

Japanese authorities say they look at the speed of yen falls, rather than levels, and whether the moves are driven by speculators, in deciding whether to step in.

They also consider it important to seek the support of Group of Seven partners, notably the United States if the action involves the dollar, for coordinated intervention which usually has a longer lasting impact than unilateral action.

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Japan bought yen in September, its first foray in the market to boost its currency since 1998, after a Bank of Japan (BOJ) decision to maintain ultra-loose policy drove the yen as low as 145 per dollar. The U.S. Treasury said after last year's intervention that such actions should be rare.

The United States last month removed Japan from its currency monitoring list in its twice-yearly currency report. Some market players say the move may make it easier for Tokyo to intervene in the market.