Transforming Japan’s trading landscape
By Taichi Shibuya, Head of Japan, Tradeweb
How is the market structure for Japanese government bond (JGB) trading divided between electronic and voice execution, and how has that mix evolved over time?
In recent years, the JGB market has undergone a meaningful shift toward electronic execution, with international and domestic investor participation increasing and supporting this transition. From 2020 to 2024, total traded volume in JGBs on the Tradeweb platform increased by around 350%, while from Q1 to Q3 2025, it increased 23% compared to Q1 to Q3 2024.
While foreign investors accounted for roughly 65% of this activity, domestic participation is also accelerating. Japanese institutions have expanded their electronic trading of JGBs on Tradeweb seven-fold since 2020, demonstrating growing adoption among both global and local market participants. This evolution has brought the market to an important inflection point for electronic trading. Based on our own estimates from conversations we’ve had with dealers and JSDA data, we estimate that electronic trading now accounts for between 45-50% of all JGB secondary dealer-to-client (D2C) volume – up from around 25% in 2019. In other words, the share of electronic execution has roughly doubled in six years, underscoring a notable structural shift in how JGBs are traded.
Today, electronification is strongest in the D2C segment and in more standardised JGB cash transactions, list trades, and close orders (Hikene trading). Voice and chat are typically used for larger block transactions, cross market instruments such as bond basis trades, and other bespoke trade types.
However, electronic trading is no longer limited to just low-touch trades. Clients are increasingly adopting electronic workflows for larger and more complex activity as platforms replicate, enhance and streamline traditional voice workflows. Tradeweb continues to evolve its platform offering to cater for a full spectrum of trading activity – from simple outrights to multi-line lists and asset swaps – with a view that technology amplifies, rather than replaces, the interaction clients have with dealers.
What factors are driving the current shift in trading behaviour, and how do these trends differ between domestic and international participants?
The inflection in JGB electronification reflects both macro and structural forces. The end of negative interest rates, the gradual normalisation of yields, and the Bank of Japan’s slowing purchases of JGBs have created a more dynamic, two-way market environment with greater emphasis on price transparency and efficient risk transfer.
At the same time, technology, data and analytics have become central to how firms think about best execution, transparency and operational risk, with electronic trading platforms offering efficiencies across all of these areas. This has encouraged both domestic and international investors to adopt electronic workflows as trading volumes increase and liquidity becomes more dispersed.
International investors remain the earliest adopters of electronic trading in Japan. Many already use electronic tools when trading other government bond markets and expect consistent execution protocols, data transparency, and post-trade efficiency in JGBs.
For these participants, electronic platforms like Tradeweb’s solve practical challenges such as time zone coverage and language barriers. They can access onshore liquidity during Tokyo’s core hours without maintaining dedicated overnight desks or relying solely on voice coverage. As a result, offshore participants have been a major drive of electronic trading growth as they account for roughly two-thirds of JGB volume traded on Tradeweb.
Domestic institutions, while initially slower to transition, are increasingly embracing electronic execution. Rising JGB demand, a more dynamic market environment and a new generation of traders who already trade FX and equities electronically are accelerating adoption.
Domestic traded volumes have grown on Tradeweb, with their share of total JGB activity on our platform having grown from under 20% in 2020 to more than 35% today. As local institutional investors become more familiar with Request-for-Quote (RFQ), list trading, closing protocols and automation, electronic execution is becoming embedded in their day-to-day workflows.
Many buy-side firms are using Yen interest rate swaps (IRS) as an overlay alongside JGB portfolios. How do electronic platforms like Tradeweb’s support this activity?
For many global macro funds and asset managers, Yen interest rate swaps are a natural overlay to JGB portfolios, allowing them to adjust duration, express curve views or hedge liabilities without materially disturbing the underlying bond holdings. Electronification makes that overlay far more scalable. Around 30-40% of D2C Yen swap activity is now traded electronically, and Tradeweb accounts for the majority of the electronic market, offering clients a familiar multi-dealer environment and a broad set of execution protocols.
A key advantage for clients is the ability to integrate JGB and IRS execution into unified electronic workflows.
Tradeweb’s non-contingent asset swap functionality allows clients to execute the bond and swap legs with separate, specialised dealer sets, something that is difficult to replicate in voice markets – especially for off-the-run JGBs where pricing often resides on a separate desk. From the client’s perspective, the platform recombines the best prices on each leg into a single package, improving overall economics and reducing operational friction.
Regarding clearing, Tradeweb supports trading workflows for clients clearing through JSCC, LCH, and CME. Our role is to provide flexible, compliant execution pathways across venues and clearing houses, ensuring that clients can implement their Yen overlay strategies in the way that best fits their operational and regulatory requirements. In addition to having LCH and CME access, US investors can now also use JSCC to clear Yen swaps.
While electronic JGB trading continues to grow, voice execution still remains prevalent for larger or more complex transactions, including basket trades. How are electronic trading platforms helping to electronify this market and these trading strategies?
The most complex parts of the JGB market – large blocks, cross-market trades, as well as intricate baskets – have traditionally been handled by voice, but the boundary is shifting as platforms replicate and enhance legacy workflows. Tradeweb, for example, already supports list trading for up to 60 JGB line items at once, allowing asset managers to also execute Hikene trades (trade at close orders) electronically rather than managing multiple spreadsheets and chat threads with different dealers.
Hikene workflows are also fully electronified: clients negotiate spreads on platform and orders are filled once the close price of the day is published with no manual re-keying. This eliminates manual interventions and reduces operational risk.
On the swaps side, the electronification of JGB asset swaps has been a meaningful step forward. By enabling clients to trade JGB and swap legs separately, with optimised dealer sets and straight-through processing into clearing, confirmation and risk systems, electronic platforms reduce the operational complexity that previously kept these trades in voice channels. Over time, we see similar opportunities to bring more JGB basis, futures-linked strategies and larger, more bespoke risk transfers onto electronic rails, while still giving traders the flexibility to choose the right mix of screen and voice for each situation.
Firms point to solutions like Tradeweb’s Automated Intelligent Execution (AiEX) tool as playing a growing role in shaping trading workflows. What advantages does automation bring to market participants?
Automation is becoming a defining feature of how firms structure their JGB and Yen swap trading. Tools like Tradeweb’s AiEX helps clients scale efficiently, enabling them to manage increasing ticket volumes and complexity while maintaining high execution standards. AiEX allows clients to encode execution parameters – such as counterparty selection, quote thresholds, price tolerances, and timing – so these can be applied consistently and transparently across trades.
In Japan, AiEX’s Time Release functionality has been particularly impactful. Given that Yen rates liquidity is concentrated between 8:45am and 15:02pm Tokyo time, international investors historically faced a trade-off between sub-optimal execution or maintaining overnight trading coverage. Time Release allows trades to be scheduled during Tokyo hours, while maintaining the transparency and control of electronic RFQs, effectively solving a longstanding operational challenge.
Beyond execution quality, automation strengthens operational resilience. Seamless integration with Order Management System (OMS)/Exchange Management System (EMS) platforms, clearing houses and confirmation systems supports straight-through processing, auditability and regulatory compliance. As Japan’s fixed income markets become more data-driven and cross-border, these automation tools help both domestic and international investors modernise their workflows and enhance their ability to trade efficiently and consistently.
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This article was first published on The DESK and forms part of the joint Global Trading & The DESK Special Report on Japan. To download the full Japan Report click on the image below:
