By Brendan Conway

The International Monetary Fund just shot something of an arrow over the bow of Japans Abenomics. Short version: The yen is weak enough already, maybe even too weak. So you can stop devaluing right here.

A senior official outlined whats clearly intended as a qualifier to the IMFs support of Japans aggressive new monetary policy, support which until now sounded pretty much unqualified.  From Reuters Stanley White and Tetsushi Kajimoto.

The yens depreciation since last year has left it slightly below a level consistent with Japans medium- to long-term economic fundamentals. a senior International Monetary Fund official said on Friday.

David Lipton, the first deputy managing director of the IMF, said the yens current depreciation is not problematic if accompanied by fiscal and structural reforms Prime Minister Shinzo Abe has promised to deliver.

Lipton also said the yen and the current account balance should move to levels consistent with economic fundamentals as fiscal and structural reforms, which are part of a package dubbed Abenomics, are put in place.

Previously, the IMF had said that the yen was moderately overvalued. The change in tone shows that while the IMF now thinks that yen weakness has gone a little too far, it expects this trend to correct itself over time.

We appreciate that the attempt to escape deflation has had an effect on the exchange rate and our assessment is right now that leaves the exchange rate moderately below what would be consistent with medium-term norms, Lipton said.

The yen bears have managed to defend their turf in spite of it, with the Japanese currency only slightly higher versus the dollar. Around 8 a.m. the trend looked ready to break below 100 yen per dollar for the first time since May 9, but it didnt happen. The dollar is fetching 100.79 yen midmorning on Friday.

The Nikkei rose 1.4% overnight but here in the U.S. investors are pushing  iShares MSCI Japan Index Fund  (EWJ ) and WisdomTree Japan Hedged Equity Fund  (DXJ ) lower by about 1.7% apiece.

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