Is Japan's monetary shift shaking up global capital flows?

Japan’s recent monetary tightening, led by the Bank of Japan’s (BoJ) gradual rate hikes and loosening of yield curve control, is starting to reshape global capital flows. While early August’s market volatility was attributed to the yen carry trade, this explanation may be too simplistic. The BoJ’s policy changes could have longer-term impacts, especially as Japanese domestic investors are drawn back to Japanese Government Bonds (JGBs), potentially diverting capital from U.S. Treasuries and German bunds. As JGB yields rise, this reallocation of capital could have significant consequences for...