Japanese banks provide substantial funding to international investment and hedge funds. So the investment funds community in Japan has viewed the introduction of the Basel II Accord in Japan with some trepidation.
Initial concerns were raised in the funds marketing community as early as mid-2005, when a number of Japanese regional banks started to ease the amount of their new investment in hedge funds. This trend continued through 2006, when rumours began to circulate of big redemptions of fund investments both by Japanese megabanks and super-regional banks, apparently because of capital charge concerns resulting from the implementation of the Basel II.
Since then, this trend appears to have accelerated, although the rate of disinvestment from hedge (and to a lesser extent private equity) funds cannot be attributed solely to the implementation of the Basel II. Some observers have suggested that many banks have used Basel II implementation as a cover...