• Last weeks initial failure to break above 160.00 saw USD/JPY option implied volatility suffer beside its G10 peers

• Friday's NFP beat reignited upside pressure, boosting vols as USD/JPY pushes above 160.00 and intervention risk returns

• Benchmark 1-month implied vol reclaims recent highs, recovering to 7.4 from 6.4, other tenors marginally firmer

• Risk reversals retain firm JPY call premium over puts — 1-month 25-delta holds 1.05, flagging intervention concerns

• Notably, rising USD/JPY would typically see JPY calls lose ground to puts, making the persistent skew an anomaly

• Sub 1-month 10 delta butterfly spreads regain recent multi-year highs - reflecting USD/JPY breakout fears

• Elevated butterflies signal higher vol premium for low-delta puts and calls vs ATM, reflecting demand for tail risk hedges

• Related comment - The FX options market gets its wake-up call
Benchmark 1-month expiry FXO implied volatility


USD/JPY 25 delta risk reversals


USD/JPY 10 delta butterfly spreads


(Richard Pace is a Reuters market analyst. The views expressed are his own)