A quarter point in Tokyo would narrow the dollar-yen policy spread by about a tenth

The Fed's range midpoint is 3.625 percent ^[12]. Seoul Economic Daily gives the Bank of Japan policy rate as above 1 percent after June's quarter-point move ^[7]. Set against that, the spread a yen-funded dollar position collects before any currency move runs under 2.6 points ^[13]. Because that 0.25 carried the Japanese benchmark across 1 percent, the level now sits between 1.00 and 1.25 percent, so the spread sits between roughly 2.4 and 2.6 points ^[20]. A quarter point in Tokyo on the 18th, with Washington on hold two days earlier, takes it below about 2.4 ^[14]. Holding would be the Fed's sixth meeting in a row without a change since January ^[15].

The Japanese side is the more mechanical of the two. A move this month lands three months after the June hike ^[7], and another 0.25 puts the benchmark above 1.25 percent ^[18]. The preview's forward-looking calls rest on unnamed sources: "some market watchers" for the possibility of a Fed hike, "analysts" for faster Japanese timing ^[19].

Two days separate the decisions, the Fed's on the 16th and the Bank of Japan's on the 18th ^[16]. A position adjusted after the first carries the second for those two days. In Seoul the same week brings a confirmation hearing on the 15th for Lee Hyung-il, the nominee for deputy prime minister for economy and finance minister ^[11]. It also brings August export and import price indexes and the producer price index from the Bank of Korea, which the paper says will show how won-dollar moves and international oil prices fed through to prices ^[9].

A hawkish hold moves projections in the dot plot without moving what a dollar borrower pays in September ^[4]. The thesis fails on one outcome. If the Bank of Japan holds on the 18th, the spread stays near the top of its 2.4 to 2.6 band ^[20] and neither decision changes the cost of yen funding.