Bank of Japan governor Toshihiko Fukui said in a parliamentary testimony that the BoJ's latest rate hike in February did not directly trigger the recent global stock market slump. He also sought to alleviate investor fears by saying that "the stock market in each country is making an autonomous correction (to lopsided positions)." Fukui told the upper house financial affairs committee that the Group of Seven major nations earlier this year had warned about the adverse impact of such large "lopsided" positions in financial markets on the economy. BoJ policymakers are closely monitoring how a sharp unwinding of huge positions built in financial markets affect the real economy, "but we mainly make judgments on monetary policy on domestic economic and price developments," he said. "I don't think there is a direct link between the last rate hike and the recent global stock market weakness," he said. At its last regular meeting on Feb 20-21, the BoJ's nine-member policy board voted 8-1 to raise the target for the overnight call rate to 0.5 pct from 0.25 pct in a second rate hike in the current credit tightening cycle launched in July 2006. Asked how central banks are coping with hedge funds that are believed to be behind speculative trades, Fukui said the BoJ "would encourage awareness of investment risks among customers and financial institutions who are directly dealing with hedge funds, rather than regulating them immediately." It is hard to accurately estimate the scale of rapidly growing hedge funds, but the BoJ "more or less" agrees with the private-sector consensus that assets managed by hedge funds total 1 trln usd globally, Fukui said. Asked about carry trades, Fukui said "it is a fact that unwinding of short-term arbitrations is going on," but added that in a broader sense, Japanese individual investments in higher-yielding bonds, savings and mutual funds in other countries is part of the yen carry trade. Individual investors who are unhappy with low returns on investments and savings in Japan are "behaving differently than speculative short-term hedge funds," Fukui said. "They are not rapidly unwinding their positions with a little trigger."