(Bloomberg) -- It would take broad risks to the global financial system for the US to potentially coordinate efforts with Japan to shore up the beleaguered yen, according to Bank of America Corp.

With likely interventions by Japan to support the yen yielding muted results — and markets on alert for further efforts — BofA strategist Alex Cohen sees steps that involve the US warranted only if there’s “excessive volatility or disorderly and illiquid conditions in markets.” A currency that doesn’t reflect fundamentals could also merit the US potentially selling dollars and adding to yen-denominated reserves or operate as an agent for BOJ, he wrote in a Monday note.

“While the yen appears undervalued by any reasonable measure, at the same time it is difficult to argue that the level of USD/JPY is unjustified,” Cohen said. “Tacit approval of Japan‘s unilateral activity seems to be the most the US Treasury is willing to concede at present.”

The selloff in the Japanese currency this year sent the yen to breach 160 per dollar late last month, a level not seen since 1990. That was followed by sharp reversals, prompting speculation Japanese officials had intervened to stem the slide. After hitting just below 152 earlier this month, the yen weakened back to trade around 156.

At the center of yen weakness and dollar strength is the vast differential in central bank interest rates between the two countries. Fueling the recent selloff has been signs of sticky US inflation and Federal Reserve officials pushing back on the outlook for cutting their benchmark anytime soon.

Treasury Secretary Janet Yellen on Monday continued to register discomfort with government intervention in currency markets.

“It’s possible for countries to intervene,” Yellen said, refusing to comment on a situation in a specific country. “It doesn’t always work without more fundamental changes in policy, but we believe that it should happen very rarely and be communicated to trade partners if it does.”

Meanwhile, Japan has not officially commented on its interventions. While hedge funds fled bets against the yen after the currency’s sharp slide and a U-turn, the market still maintained overall short view on the yen.

Cohen noted among scenarios that could warrant coordinated intervention would be consistency with the broader US policy objectives. 

While the Bank of Japan is running a loose monetary policy in efforts to fuel consumer-price growth, the Fed is waiting for more progress on reining in inflation, with investors focused on reports this week on producer prices and consumer prices for more clues on the timing of any cuts.  

“In a more benign inflationary environment, the benefits to the US of a weaker USD would be more evident,” he said. But “selling USD while the Fed has yet to achieve confidence to reduce restrictiveness would present policy incoherence.”

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