Yen rose as intervention warnings meet talk of earlier BOJ rate hikes (April hike risk)

The yen strengthened after Japan's Finance Minister Katayama reiterated that intervention remains an option. A Reuters report indicated that some policymakers at the Bank of Japan (BOJ) see scope for earlier rate hikes, particularly in April. While the BOJ is expected to maintain its interest rate at 0.75% during January's meeting, the internal debate over timing is gaining traction. The risk posed by a weak yen, which increases the costs of imports and could elevate inflationary pressures, has drawn increased attention within the BOJ. Although market expectations are largely focused on mid-year for the next rate hike, Katayama's comments have shifted market perceptions, suggesting potential government intervention. In next week’s review, the BOJ may adjust its fiscal 2026 growth and inflation forecasts upward. The April meeting will be crucial as it follows the annual wage negotiation season and provides fresh insights into wage growth and inflation persistence. Consequently, the combination of intervention signals and a potentially hawkish stance from the BOJ could provide near-term support for the yen, despite longer-term sensitivity to U.S.-Japan rate differentials and global risk sentiment.