BoJ hiked to 1.25. Yen fell. Quad witching, $7T notional.

Catalyst check. Friday September 18. Three catalysts landed. First, the Bank of Japan policy decision released 12:30 PM JST (11:30 PM ET Thursday): 25 basis point hike to 1.25 percent, the highest policy rate since 1995. Vote 7-2 with board members Toichiro Asada and Ayano Sato dissenting. Statement cited "upside inflation risks beyond the 2 percent target" as the rationale. No forward-guidance language on the pace or timing of further moves. Governor Kazuo Ueda's press conference at 3:30 PM JST (2:30 AM ET): 51 minutes, Ueda repeatedly declined to commit to a further-hike timeline, cited "data-dependent" language six times, and specifically named "no promise of subsequent moves at future meetings" in response to a question on the December meeting. Second, Existing Home Sales for August at 10:00 AM ET: 4.06 million SAAR versus consensus 4.10 million, unchanged from July's revised 4.06 million. Median existing-home price $427,700, up 2.8 percent year-on-year. Third, Quad Witching (Triple Witching in some parlance) options expiration: approximately 7 trillion dollars of US options notional value expired on the Friday close, the second-largest September expiration on record. Release times verified against the Bank of Japan official statement, the National Association of Realtors release schedule, and CBOE/CME expiration calendars.

Thursday's piece read the setup as doubly binary with USD/JPY at 156.20 and BoJ hike odds at 62 percent, and the framework's base case at Combination 2 (hike + measured + split at 45 percent probability), producing USD/JPY 157-158.50 by Friday's New York close. Friday delivered exactly Combination 2: 25bp hike, 7-2 vote (split), Ueda measured and dovish in the press conference. USD/JPY grinded through 157, then through 158, and closed at 158.05 New York, comfortably inside the framework's target range. The pair added 185 pips on the day of a hike, which is the specific "hike but yen falls" outcome the framework flagged as most likely.

The tape

• DXY: 100.32, up 25 pips from Thursday's 100.07. Intraday range 99.98 to 100.42. Two touches of 100.00 during the Asian session (once on the BoJ statement, once on Ueda's Q&A) that both held. First close above 100.30 since March. The dollar's extension is now confirming the SEP-median trajectory in week one of the restart-hike cycle.
• 10-year yield: 4.925 percent, down 1.3bp from Thursday's 4.938 percent. Modest curve dip on the BoJ hike (some Japanese life-insurance flow reversal into JGBs), but comfortably above 4.90. The 30-year down 2.4bp to 5.019 percent; the 2-year unchanged at 4.574. Very small vol on the curve.
• Gold: $4,275.60, down $9.60 from Thursday's $4,285.20. Second consecutive close below $4,300. The $4,200 reference is the next area of interest; the multi-year rally spent limited time here.
• USD/JPY: 158.05, up 185 pips from Thursday's 156.20. The pair sold on the initial BoJ statement (touched 155.20 in the first ninety seconds), then rallied through Ueda's press conference on the "no path signal" language, extended through 157 in the London morning, and pushed to 158 in New York. First close above 158 since March. The 185 pip gain on a BoJ hike day is the specific footprint of a "hike-but-dovish-guidance" outcome.
• EUR/USD: 1.1435, down 27 pips. GBP/USD: 1.3325, down 33 pips. Both proportionate to the DXY extension. The euro has broken its 200-day moving average; sterling has broken its 200-day and is close to its 55-week low.
• Brent CFD spot: $93.90, down $0.85. Jazan restart continued; the supply-shock premium is now roughly 55 percent priced out. Range $93.30 to $95.10.

The BoJ decision

The 25bp hike to 1.25 percent was largely priced (62 percent going in, 68 percent by London close Thursday). The two consequential surprises were the vote and the press conference. The 7-2 split with Asada and Sato dissenting is a stronger dissent than the July 2024 hike (which was 7-2 in the opposite direction, with two members wanting a larger move). The specific message from a split-dissent-on-hold is that the committee is not aligned on the trajectory: two members explicitly rejected the hike as unnecessary given "the recent softness in domestic demand" per the statement's paraphrasing. That kind of dissent is what the framework calls the "split hint" signal, and it typically pushes the market to price a slower forward pace of BoJ moves.

Ueda's press conference reinforced the dovish forward-guidance dimension. Six uses of "data-dependent"; specific refusal to name a December meeting expectation; the phrase "we assess the impact of today's move on economic activity" three separate times. That is the specific communications playbook that reads as dovish-forward-guidance, and it is exactly what the framework's Combination 2 case describes. See our Fed-BoJ 48-hour window framework for the full four-combination decomposition.

The market's reaction is textbook "hike-but-yen-falls". The initial 90-second dip on the statement priced the hike; the following 15-minute recovery priced Ueda's caution; the extension through New York priced the "one-and-done" reading. The 185 pip USD/JPY move up on a BoJ hike day is the specific footprint that says the market has fully priced the BoJ's ceiling for this cycle at 1.25 percent, and the forward differential no longer supports further yen strength through the Fed-BoJ pair.

Quad witching

Quad witching Friday saw approximately 7 trillion dollars of options notional expire. That is the second-largest September expiration on record; it lands on the same session as the BoJ decision and the fourth day after a hawkish Fed restart-hike. The specific footprint of a large quad-witching Friday combined with a fresh macro catalyst is typically elevated intraday range and reduced end-of-day directional conviction: dealers are unwinding hedges, exercise flows create idiosyncratic pin-risk on specific strikes, and the true end-of-day fair value gets obscured until the following Monday's Asian open.

Practically, this means Friday's closes are less reliable signals for the next Monday's opens than a normal Friday close would be. See our quad witching framework for the specific pin-risk mechanics and how to read a Friday close that lands on a quad witching in the middle of a macro catalyst window.

The read

The 48-hour Fed-then-BoJ window has resolved in favour of dollar-strength on both dimensions. Fed hiked with hawkish dots; BoJ hiked with dovish guidance. Both outcomes stack in the same direction for USD/JPY (higher) and for DXY (higher). The 185 pip USD/JPY move on Friday is the specific proof that the BoJ side of the Fed-BoJ pair has cleared its optionality and further USD/JPY moves are now Fed-driven only.

Existing Home Sales at 4.06 million is soft but on trend with the recent NAHB and Housing Starts signals: the housing dimension of the dashboard is decelerating without cracking. Prices still up 2.8 percent year-on-year suggests the deceleration is on the volume side rather than the price side, which reads as a slower-growth signal rather than a crashing-market signal.

Working thesis updates. Additional-hike-within-2026 at 62 percent (down 3 percent on Ueda's cautious framing, which slightly reduces the transmission of foreign-central-bank hawkishness into the Fed's reaction function). Hold-through-2027-with-no-cuts at 33 percent (up 3 percent). Cuts-restart-inside-2027 at 5 percent (unchanged). The distribution is inside the same envelope as Wednesday's post-FOMC close.

Setup update

Confirmed if: DXY holds above 100.10 through Monday's London close, USD/JPY holds above 157.50, and 10Y holds above 4.90 percent. That combination signals the SEP-median trajectory is fully priced and the next data anchor becomes September Core PCE (September 26).

Invalidated if: DXY breaks 99.80 on the Monday close (which would signal the FOMC repricing is complete and the market is fading the hawkish read) OR USD/JPY reverses through 156.00 on any single-session catalyst (which would signal a residual dovish tail from the Ueda press conference we have not fully accounted for).

Watch next week: Monday September 21 is a data-quiet US session with only the Chicago Fed National Activity Index at 8:30 AM ET; European Central Bank speakers likely (ECB blackout has now closed since the September ECB meeting). Tuesday delivers Consumer Confidence and Case-Shiller Housing at 9:00-10:00 AM ET; Wednesday delivers New Home Sales at 10:00 AM ET. Thursday delivers 2Q Final GDP and Weekly Claims at 8:30 AM ET; Friday September 25 delivers the August Core PCE Deflator at 8:30 AM ET, the specific print the Fed's dot plot was built around and the first post-FOMC test of the reaction function.

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