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Kinkin Osaka Ginko is a Japanese regional bank, focused on retail and mid-sized commercial banking for domestic firms. Kinkin Osaka Ginkos main source of funding is retail deposits denominated in Japanese Yen. A commercial client of the bank, Kirin Beverages, approaches the bank to borrow $20 million USD for one year, to fund a small acquisition in the United States. Kinkin Osaka Ginkos treasurer, Yuji Tanaka, wants to raise the USD to meet his client request. Unfortunately, the banks charter prohibits Tanaka from directly taking foreign exchange risk. Tanka believes his bank can raise the required USD, without taking FX risk, via so-called JPY/USD cross currency basis market. Tanka notes the following market data:

Instrument	Live Quote
JPY/USD 1y basis swap	LIbor -30bp
1 Year USD Libor	2.65%
1Year JPY LIbor	.75%
USD/JPY FX rate - spot	108.37
US/JPY FX rate 1 year forward	110.43

Tanaka notices the market quote for the JPY/USD 1y basis swap has moved from Libor -30bp to Libor -50bp. This implies that

1. Acquiring USD vs JPY in the basis market has gotten relatively less expensive
2. Acquiring USD vs JPY in the basis market has gotten relatively more expensive
3. The Japanese Yen has appreciated vs. the USD in the foreign exchange market