Nov 19 (Reuters) - USD/JPY may be capped for now on a likely Bank of Japan rate hike at its December meeting and renewed caution over FX intervention by Japanese authorities on the recent rally to 156.76 on November 15.

BOJ Governor Kazuo Ueda expressed caution over hikes on Monday but Tokyo still sees the bias as distinctly hawkish, unlike many offshore players.

The BOJ rarely makes explicit statements on policy shifts, and that remains true. What can be ascertained is that the BOJ is ready to hike if its outlook on the economy and prices prove correct, which appears to be the case.

Q3 data was definitely weak

but there are indications of both prices and growth picking up in Q4 .

Japanese government bond yields reflect the BOJ December hike view with the yield on two-year paper up to 0.565% Monday, the highest since Q4 2008. That on ten-year JGBs rose to 1.085% Friday and Monday, near the 1.106% high of the year on July 3 and 25.

On FX intervention, many offshore players do not see any action till USD/JPY nears the year's peak of 161.96 if not higher .

The feeling in Tokyo is that the Ministry of Finance is only waiting for the most opportune time, unwilling to act while the U.S. dollar remains broadly bid, diluting the effects of any action. Such action could come in tandem with a possible BOJ hike in December should JPY remain weak then.

Like the BOJ, the government too sees an extremely weak yen as anathema given upside pressures from imported inflation and higher commodity costs. Related comments , .

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(Haruya Ida is a Reuters market analyst. The views expressed are his own. Editing by Ewen Chew)

((haruya.ida@thomsonreuters.com; ewen.chew@thomsonreuters.com))