The Japanese yen volatility is approaching a six-week high, with the market focusing on Tokyo inflation data.

On Monday, key indicators tracking short-term price fluctuations of the Japanese yen significantly rose, gradually approaching the six-week high. Currently, the market environment is complex, with traders facing the serious situation of rising inflation pressure on one hand, and having to consider the warning from the Bank of Japan regarding the sharp increase in bond yields on the other hand. These two major factors intertwine, making the yen's trend full of uncertainty. Specifically, the implied volatility of the one-month USD/JPY futures has risen for the second time in three days, reaching 10.77%, likely to achieve the highest closing price since January 15. This change in data reflects the drastic change in market expectations for the future trend of the yen. At the policy level, there is a significant difference in investor opinions regarding the pace at which policymakers withdraw monetary stimulus measures. Last week, Japan's announcement of the acceleration of inflation beyond market expectations sparked widespread attention. The Tokyo Consumer Price Index (CPI) to be announced this week has become a market focus, with expectations that the data will further strengthen expectations for a Bank of Japan rate hike. As market expectations for the tightening of Japanese monetary policy continue to increase, the yen has seen a strong upward trend in February, with a gain of nearly 4%. Among the 16 major currencies tracked by Bloomberg, the yen is expected to be among the best-performing currencies. However, Bank of Japan Governor Haruhiko Kuroda issued a clear signal last Friday, stating that the central bank is prepared to intervene in the bond market to curb the sharp rise in bond yields. This statement quickly impacted the market, leading to a narrowing of the yen's gains. While the yen still has the potential for further appreciation in the long term, any subsequent actions by the Bank of Japan in the coming weeks are likely to cause significant volatility in yen prices. The latest market data shows that in Monday's trading of one-month USD/JPY risk reversal options, the premium on put options reached 1.46%. This data clearly indicates that the market generally expects the yen to continue its upward trend in the next month. Compared to call options, traders are more willing to pay a higher price for put options betting on a decline in the USD/JPY, reflecting the optimistic sentiment of the market towards the yen's trend.