Modest Downside Skew for Spot in Post-BoJ Expiries

• The break above Y155.00 in overnight trade keeps the JPY in focus as the market continues to attempt to gauge the limits and triggers for potential intervention. As a result, Friday’s Tokyo CPI print and BoJ rate decision are in focus, particularly after the Nikkei article overnight suggested the board would discuss recent JPY weakness directly at their meeting – which starts Thursday.
• Vol markets are bid, with one-week USD/JPY implied rising back toward 11 points as the contract captures next week’s Fed rate decision. Nonetheless, markets are pricing a moderate downside skew for the pair for options expiring at Friday’s NY cut, with implied probabilities seeing a greater likelihood for spot lower at expiry:

• Y155.00 – 46.9%
• Y155.50 – 23.5%
• Y156.00 – 16.4%

Below:

• Y155.00 – 53.1%
• Y154.50 – 36.6%
• Y154.00 - 20.4%

Our full BoJ preview is here: https://roar-assets-auto.rbl.ms/files/61017/BOJ%20... , with market focus on any messaging to support a potential July rate hike, and the view surrounding risks to inflation sustainability ahead.