Svmuu News: Deutsche Bank analyst George Saravelos noted in a report that if the Federal Reserve shifts its policy focus from raising interest rates to reducing its balance sheet (i.e., quantitative tightening) to tighten monetary policy, the U.S. dollar could weaken as a result.He noted that Japan’s experience offers a useful lesson: although Bank of Japan (BOJ) interest rate hikes were gradual, the country withdrew liquidity through quantitative tightening at a record pace, yet the yen remains at historic lows.
Furthermore, balance sheet reduction could lead to policy conflicts with Donald Trump the government, as Donald Trump the government has made it clear that it wishes to keep long-term government bond yields at low levels. He also noted that Bank of Japan (BOJ) the central bank’s independence remains a focus of market attention. Japanese Finance Minister Katayama Satsuki has even discussed using domestic savings to prop up the Japanese bond market. (Jinshi)