The Bank of Japan warns that rebalancing by overseas hedge funds may pose a risk to the Japanese bond market.

The Bank of Japan warned that potential position adjustments by hedge funds globally could impact Japan's bond market. In its semi-annual financial system report on Tuesday, the Bank of Japan stated, "The influence of overseas hedge funds in the Japanese bond market is continuously increasing." It is necessary to closely monitor the possibility that if foreign hedge funds unwind positions globally under pressure, the impact may transmit to the Japanese bond market through factors such as a decrease in market liquidity. According to analysis of data from the Japan Securities Dealers Association, overseas investors accounted for 60% of trading in Japanese government bonds last month. In Japanese government bond futures trading, their share is even higher at 78%, and they dominated transactions in March.