• USD/JPY FX option premiums spiked higher as spot tests BoJ intervention resolve at 160.00

• Implied volatility higher - 1-week expiry jumped 5.0 to 7.0, 1-month from 4-year low at 6.3 to 7.3

• 1-week 10 delta butterfly spread high since 2020 at 2.9, 1-month 10 delta since 2022 at 1.8

• Risk reversals keep a high JPY call over put risk premium despite higher spot as intervention hedge

• Dealers also note demand for 161.00-162.00 strikes to hedge topside breakout if BoJ decide to wait

• Next big event is Friday's NFP - overnight USD/JPY implied vol gains exceed peers to flag heightened FX risk
USD/JPY 10 delta butterfly spreads


USD/JPY FX option implied volatility


Overnight expiry FXO implied volatility


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