BlockBeats News, July 16th, Deutsche Bank analyst George Saravelos pointed out in a report that if the Federal Reserve shifts its policy focus from rate hikes to balance sheet reduction (i.e., quantitative tightening) to tighten monetary policy, the US dollar may weaken as a result. He stated that Japan's experience is worth learning from. Despite the Bank of Japan's slow pace of rate hikes, it has rapidly unwound liquidity through quantitative tightening at a record pace, while the yen remains at historical lows.

Furthermore, tightening the balance sheet may also lead to policy conflicts with the Trump administration, as the Trump administration has explicitly stated its desire to keep long-term bond yields at low levels. He also noted that the independence of the Bank of Japan continues to attract market attention. Japanese Finance Minister Taro Aso has even discussed using domestic savings to support the Japanese bond market. (FX678)