Why Investors Are Worried About Japan’s Bond Market: QuickTake

Japan’s bond market has burst back onto the global stage, ending years of uneventful trading with a spike in volatility that is worrying investors already spooked by frictions in US Treasuries.

The country’s central bank — the Bank of Japan — seen as a “whale” of the domestic bond market because it owns more than half the nation’s sovereign notes, has been gradually trimming its balance sheet and scaling back its purchases. But the problem is, other buyers are yet to step in enough to fill the gap left by the BOJ.

This change in central bank policy has ...