• Overnight FX option expiry includes Tuesday's Bank of Japan policy decision but related USD/JPY premium is very low

• Overnight expiry USD/JPY implied volatility is 12.0 - a premium break even of 79 JPY pips in either direction

• According to Bank of America - 12.0 is 7.5 vols below the long term median average for BoJ pricing

• BoA also note that 12.0 is 0.5 below Aprils BoJ meeting price - itself the lowest price in 4-years (34 meetings)

• Broader JPY implied vol weighed by topside long gamma from 161-162 barriers/triggers and tight spot ranges of late

• US/Iran preliminary peace deal adding further weight as broader FX volatility risk premiums are reduced
Overnight expiry USD/JPY FX option implied volatility


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