I believe this issue is not receiving enough attention. In the second quarter, the Bank of Japan reduced its balance sheet by another $146 billion, marking the largest quarterly decline since quantitative tightening began. Since its peak, total assets have fallen by $726 billion, or 15.6%.
Japan is the world’s third-largest economy, and its monetary policy can influence global financial markets. Continued tightening could therefore mean less liquidity, greater volatility in bond markets, and increased pressure on the global financial system.
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