USD/JPY surged to a 9½-month peak near 155.40 despite warnings from Japan’s Finance Minister over excessive yen moves. Market focus remains on the Bank of Japan’s gradual rate normalization, with a 25bps hike fully priced for April, while immediate intervention risks appear limited, BBH FX analysts report.

BOJ signals gradual adjustment amid inflation recovery

"USD/JPY hit a 9-1/2-month high near 155.40 overnight. JPY largely ignored Japan Finance Minister Satsuki Katayama warning against excessive yen moves. Katayama noted she’s deeply concerned about recent FX moves and is watching them with a high sense of urgency."

"Katayama’s warning on yen volatility rings hollow. A more hawkish Bank of Japan (BOJ) would do more to support JPY than the threat of intervention. However, the BOJ is in a hurry to resume normalizing rates which remains a drag on JPY. The swaps market implies 30% odds (down from 50% a week ago) of a rate hike at the next December 19 meeting, with a full 25bps rate increase priced for April."

"BOJ Governor Kazuo Ueda offered no new policy guidance following his first bilateral meeting with Japan Prime Minister Sanae Takaichi. Ueda told the prime minister 'We are in the process of making gradual adjustments to the degree of monetary easing', given that “the mechanism for inflation and wages to grow together is recovering'."