A strengthening yen could get a boost if Japan's data comes in hot.

After comments from Bank of Japan Governor Ueda, market expectations for a rate hike in December have notched higher.

Ueda said that the central bank will closely monitor data ahead of its next policy meeting and will "seriously" consider the impact of yen movements on its decision-making. A higher-than-expected core CPI reading -- forecast at 2.2% year-on-year -- or upbeat Japan PMI on Friday would strengthen these rate hike expectations.

Ueda's remarks about the yen, in particular, echo statements made after the Japanese government intervened earlier this year when USD/JPY moved above the 158 level in May. Another intervention followed above 160 in July, leading to a subsequent rate hike by the BOJ.

Given Ueda's yen comments as it nears those levels and rising geopolitical risks, option markets have turned decidedly more bullish the Japanese currency.

However, an expected rate hike by the BOJ isn’t likely to drive USD/JPY much beneath its 200-DMA of 151.93 or the 150 psychological level due to the dollar’s haven appeal and strong US economic data. For a meaningful drop in the pair, a dovish shift in the Federal Reserve's outlook or a significant deterioration in investor sentiment would be necessary. That may start to occur if Friday’s flash US PMI reading for November disappoints.

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(Robert Fullem is a Reuters market analyst. The views expressed are his own.)

((robert.fullem@thomsonreuters.com;))