The fact that transaction volumes of FX swaps are positively correlated with inward bond investments underscores the investment patterns of overseas non-banks regarding FX-hedged investments in JGSs (Chart 12). In an environment where the demand-supply balance of dollar safe assets is very tight, FX-hedged investments in JGSs may be viewed by investors as safe assets substitutable for U.S. government securities.
Thus, while we strongly support the introduction of international standards in principle, we would not like to see a one-size-fits-all or checklist, tick-the-boxes, approach. International standards need to be interpreted with an appropriate degree of flexibility in order to adequately cater for the individual circumstances of each country.