Thompson reports that demand for JPY calls, inclusive of a 1mth 117.00 strike, has helped inflate the risk reversal curve"s downside strike premium. The 1mth 25 delta R/R is currently 0.4/0.55 JPY calls over, having been 0.3/0.45 yesterday (when USD/JPY was threatening 120.00). News-wise: a US investment house predicts USD/JPY will plunge to 87 by December 2006. The prediction is contained within an FT article headlined "Yield pattern of the leading currencies poised for reversal" (p42). According to the senior G10 FX strategist at the US investment house: "The evidence is overwhelmingly in favour of lower-yielding currencies appreciating against higher-yielding currencies in the coming months". The US investment house also forecasts a EUR/JPY decline to 116.