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Shrinking BoJ balance sheet won’t have big impact

While the Bank of Japan’s JGB holdings have started to shrink and will continue to do so now that Yield Curve Control is over, we think that the normalisation of the Bank’s balance sheet could take up to a decade. While shrinking central bank demand for JGBs could put some upward pressure on bond yields, we don’t think it will have a large effect and the impact on economic activity would be minimal.

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