The Japanese yen rose in Asian markets on Monday against a basket of major and secondary currencies, extending its gains for a second consecutive day against the US dollar and hitting a two-week high, supported by warnings and actions from Japanese authorities aimed at backing the struggling local currency.

The advance was also supported by reports that several officials at the Bank of Japan favor raising interest rates again, with some not ruling out a hike as early as April, as the yens depreciation threatens to exacerbate mounting inflationary pressures.

Price Overview

Japanese yen exchange rate today: The dollar fell against the yen by 0.4% to 157.43, its lowest level since January 9, from Fridays close at 158.06. The dollar recorded an intraday high at 157.95.

The yen ended Fridays trading up 0.35% against the dollar, marking its second gain in the past three days, as part of a recovery from an 18-month low at 159.45 per dollar.

Beyond bargain buying, the yen also rose on hints of coordinated intervention between Japan and the United States to support the weakened currency.

Japanese authorities

Japans Finance Minister Satsuki Katayama said on Friday that the government will not rule out any options to deal with excessive and unjustified moves in the foreign exchange market, in a clear signal of the possibility of direct intervention to support the yen.

Katayama said the yens current weakness does not reflect Japans economic fundamentals and is hurting household purchasing power. She added that Japan remains in close contact with its international partners, especially the United States, to ensure that any action in currency markets is consistent with international understandings on exchange rate stability.

Speaking at her regular press conference, Katayama said the joint statement signed with the United States last September was extremely important and included provisions related to foreign exchange intervention.

Felix Ryan, an FX strategist at ANZ, said that nearing the intervention stage is often accompanied by statements from Japans Ministry of Finance or government officials regarding yen levels, or by inquiries made to counterparties.

Ryan added that the significance of such statements depends mainly on the dollar-yen level, as well as the speed of its movements over a 24-hour period.

Japanese interest rates

Four sources familiar with the matter told Reuters that some monetary policy officials at the Bank of Japan see scope for raising interest rates sooner than markets currently expect.

These sources point to a potential rate hike decision at the April meeting, given concerns that the continued decline of the yen could intensify inflationary pressures.

The sources, who asked not to be identified because they are not authorized to speak to the media, said the Bank of Japan does not rule out early action if sufficient evidence emerges that the economy can achieve the 2% inflation target in a sustainable manner.

Economists told Reuters that the Bank of Japan would most likely prefer to wait until July before raising the key interest rate again, with more than 75% expecting it to rise to 1% or more by September.

Pricing for the probability of the Japanese central bank raising interest rates by a quarter percentage point at the January meeting remains steady below 10%.

The Bank of Japan meets on Thursday and Friday this week to review economic developments and determine appropriate monetary tools for this sensitive phase facing the worlds fourth-largest economy.