Eurozone bond markets are at risk of a sell-off caused by a sudden retreat of Japanese investors if the Bank of Japan ends its ultra-loose monetary policy, the European Central Bank has warned.
“If the Bank of Japan decides to normalise its policy, this might influence the decisions of Japanese investors who have a large footprint in global financial markets, including the euro area bond market,” the ECB said in its twice-yearly financial stability review published on Wednesday.
The ECB said the risk of “Japanese investors withdrawing abruptly from the euro area bond market” was among the myriad possible threats to the eurozone financial system, while it judged the bloc to be largely resilient even after the recent banking turmoil in the US and Switzerland.