QT instead of Rate Hikes to Put a Floor under Plunging Yen: Bank of Japan Sheds 15.6% of its Massive Assets

The Bank of Japan has reduced its total assets by ¥116.9 trillion (15.6%) since Q1 2024 through quantitative tightening, bringing holdings to ¥639.6 trillion ($3.97 trillion) as of Q2 2026, the lowest level since Q1 2020, while pursuing this policy rather than aggressive interest rate increases to stabilize the yen and address import-driven inflation. Japanese government bond holdings declined ¥12.5 trillion in Q2 to ¥518.3 trillion, loan balances fell ¥9.7 trillion to ¥68.0 trillion, and the BOJ has begun selling equity ETFs and J-REITs at acquisition cost while allowing long-term bond yields to rise substantially, with the 30-year JGB yield reaching 4.0% and the 10-year yield reaching 2.7% despite maintaining policy rates at only 1.0%.