We think current global macro situations prompt the fed to almost defer policy actions to Q4, but sceptic statements on monetary policy outcome by BoJ may keep USDJPY at stake as the Japanese central bank is more concerned about the Yen’s further appreciation.

On the other hand, if you consider the hedging positions in medium run you can very well empathize Yen against dollar either remain in narrow range or continue to gain slightly (let's say in next 1-2 months or so) with an anticipation of Fed may continue to hold on its rate stance until Q4'16 considering global economic slowdown.

Elsewhere, let's have a glance on OTC market arrangements for hedging the uncertainty in this pair,

The risk reversals and OTC VIX for USDJPY have increased and one of the top three pairs to be hedged for further downside risks among G10 space that means hedging activities are mounting up in next 1-2m tenors, IVs for next 1 months contracts reasonably higher at around 13.30%.

But the same ATM contacts of 1-3 expiries have gradually reduced implied volatilities after the much-awaited fed's meet that has not evidenced any changes in its monetary policy that could have propped up dollar's strength (see and compare current 1w & 1m contracts with 3m-1Y tenors) but instead changed the stances on rate hiking cycle.

Most importantly, delta risk reversal for the pair is still the highest negative values (in 1m tenor) among entire G10 currency space but positive changes could be conducive for interim shorts, so we believe any short upswings are the best advantage for bears and may be utilized for shorts in hedging strategies so as to reduce the hedging costs. (Compare delta risk reversal with last week).

During that period the pair is likely to perceive little implied volatility comparatively (just at 10.70% of 1W ATM contracts) that would likely increase to 13.3% (in 1m tenors) with an increase in negative risk reversals, thus we recommend deploying short put ladder spread that contains proportionately less number of shorts and more longs which would take care of potential slumps on this pair and significantly higher volatility times.

This would mean that market sentiment for this pair has still been in the bearish zone.

Thus, short ITM put with shorter expiry since implied volatility is inching higher when risk reversals are lesser comparatively to 1M expiries which is good for option writers in next 1 week, so the strategy goes this way, go long in 2 lots of ATM and OTM put with longer expiry (per say 1M expiries) and simultaneously short 1W ITM puts with positive theta values.