• Forward-looking FX options have seen increased demand for USD/JPY strikes as high as 165.00

• A break above 163.00 barriers would benefit holders - amplifying volatility and extending upside potential

• These flows signal the market isn't ruling out further upside, with 165.00 mooted as a new potential BoJ line in the sand

• For now, USD/JPY remains anchored well below 163.00, pressuring implied volatility and option premiums

• Risk reversal contracts retain a firm JPY call premium over puts - underscoring the ever-present threat of intervention
USD/JPY FX option implied volatility


USD/JPY 25 delta risk reversals


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