Concerns over potential further Japanese intervention to bolster the yen are spreading across the foreign exchange market, prompting traders to demand increasingly higher premiums for options that help hedge against this risk. However, these costs may gradually recede in the coming days.

Currently, short-term risk reversal indicators for the USD/JPY pair are deeply negative and approaching the third standard deviation, signaling a clear demand for put options. The demand for hedging against a sudden yen surge is most pronounced in cross-currency pairs such as the Australian dollar and even the Norwegian krone.

Given the significant interest rate differential between the two economies, the long AUD/JPY trade has been particularly popular among carry traders. Reports indicate that Japan has already deployed approximately $87 billion equivalent this quarter to support the yen, surpassing the roughly $62 billion used during the April-May 2024 period, which was then considered a record level.

Given the substantial resources already expended, Japan may be inclined to pause further action. Meanwhile, U.S. Treasury Secretary Scott Bessent has urged the Federal Reserve to expand its "Foreign and International Monetary Authorities" repo facility, allowing Japan to utilize it to support the yen, suggesting that the willingness to continue intervention through the Foreign Exchange Stabilization Fund may be limited.