May 1 (Reuters) - Japanese authorities' intervention on Thursday to shore up the yen delivered exactly the reckoning that weeks of complacent pricing deserved. USD/JPY had pushed to 160.72 — historically a trigger zone for intervention — before verbal warnings from Finance Minister Satsuki Katayama and currency diplomat Atsushi Mimura combined with reported official buying sent the pair tumbling to the mid-155s. The message was unmistakable. Implied volatility responded sharply. One-month vol surged from 7.7 at the London open to 9.25 — a dramatic repricing from Wednesday's four-year low of 6.7. But as spot has since consolidated in the high-150s and the immediate panic subsided, vol has retraced almost entirely, settling back near 7.8. On the surface, that looks like a return to calm.

The risk reversal market tells a different story. One-month 25-delta risk reversals — which had been trading at just 0.55 in favour of yen calls over puts early on Thursday, surged past 1.25 as the rout unfolded. They now sit around 1.35, the highest downside over upside strike premium since early March, and a meaningful step up from pre-intervention levels. The options market is not treating this as a one-and-done event. Mimura has warned that speculation remains rife, and his pointed reference to Golden Week — with Japanese markets closed from Monday through Wednesday — was a barely veiled threat. Thin holiday liquidity is precisely the environment that can turn a quiet tape violent. Tokyo has just shown it is willing to act; the skew reflects the market's view that it may well do so again.

Spot may look more settled, but the options market is keeping its guard up — and right now, that looks like the wiser posture. Related: FX options wrap - A reckoning for complacency
USD/JPY downside over upside strike risk reversal


USD/JPY FXO implied volatility


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