Traders see a high risk that Japan’s central bank will take another significant step toward policy normalization when it wraps up a two-day meeting on Tuesday.
The cost of hedging swings in the Japanese currency after the central bank’s policy announcement stands at 33% or 200 pips, its highest level since the Bank of Japan’s July meeting.
At the time, the bank surprised markets by raising the ceiling rate on its bond buying operation to 1.0%, a move that helped the yen rally 0.5% on the day of the announcement.
Traders see the outcome of this meeting as potentially fraught with surprises, ones that could keep the yen on an upward trajectory as the central bank adopts a more restrictive stance.
