1Q26_ Quarterly Outlook Report_Final_EN - Flipbook - Page 90
T H E P LUMB LI N E | A RETU RN TO F I RS T PRI N CI PL ES
the flow impact. The ability to pause sales in the event of severe market stress further reinforces
the cautious approach.
Balance sheet normalization has begun with a long runway ahead
140%
BoJ Balance Sheet as a % of GDP
120%
100%
80%
60%
40%
20%
0%
2005
2008
2010
2012
2014
2016
2018
2021
2023
2025
Source: Bloomberg Finance LP, Scotia Wealth Management
Overall, Japan has entered a softer phase, with the 3Q25 contraction highlighting lingering
vulnerabilities beneath earlier resilience. Fiscal support and improving sentiment should help
stabilize growth, while wage dynamics and underlying inflation remain constructive. With policy
rates now at 0.75% and balance-sheet normalization underway, the exit from extraordinary
monetary accommodation is clearly in motion, albeit at a carefully calibrated pace through 2026.
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