USD/JPY volatility expensive compared to Nikkei volatility - SocGen

Research Team at Societe Generale suggests that one of their key market themes was that the BoJ’s peg of long-term yields will transfer the suppressed rate volatility to the currency and equities and the USD/JPY volatility already benefited from the volatility boost while Nikkei volatility remains on its lows:

Key Quotes

“USD/JPY volatility already has benefited from an impressive topside acceleration. But the yen depreciation should be more gradual as BoJ won’t act while US rates have picked up post the US election and following the Fed’s adjustment higher of the dot plot. The market is due to take a breather which will dampen USD/JPY realised volatility.” 

“In contrast, Nikkei volatility remains on its lows a positive directional bias on Nikkei is expected to be accompanied by higher volatility.”

“Statistical analysis suggests that the FX/Equity volatility spread is likely to mean-revert very soon.”