Investors scramble for yen protection due to fears that the currency is set to weaken further. USD/JPY'S decisive breach of the Y83 level and EUR/JPY heading toward Y110 has triggered fresh demand for protection ahead of Sunday's Japanese election. One-week USD/JPY implied volatility is trading at 12%--the highest since April--and the same expiry in the EUR/JPY cross is trading at 13%, the highest in four months. This has fueled gains along the entire implied volatility curve, with front-dated USD/JPY costs trading at the highest since June and 12-month the highest since August. EUR/JPY implied volatilies for the two-,three- and six-month tenors have risen to a three-month high.
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