The fight in Japan over interest-rate policy could be unsettling.

"The shorter it lasts, the less this very extreme interest-rate policy will affect the economy."

Fed and Treasury officials have so far taken pains not to drag interest-rate policy into regulatory arguments.

As the currency markets know only too well, a potentially damaging row over interest-rate policy has broken out.

And inflation has been kept in check by an austere interest-rate policy.

And, he said, the Fed cannot "be held hostage" to the markets on interest-rate policy.

Treasury prices were little changed yesterday in light trading ahead of the Federal Reserve's meeting on interest-rate policy today.

Few market participants expect a change in interest-rate policy to come out of the Fed's policy-making committee meeting today.

A successful economic program, including lower wage settlements and a tough interest-rate policy, has been holding inflation at around 3 percent.

But it is not clear whether a steady interest-rate policy would lead to a steady dollar.