Japan’s Government Pension Investment Fund could sell as much as $62 billion of US Treasuries without a formal revamp of its asset-allocation policy, according to analysts at Banco Santander SA. The speculation follows an unusual meeting of the GPIF management team last month that fanned chatter the $2 trillion investor is reconsidering foreign bonds for local debt. Japanese health minister Kenichiro Ueno, who oversees the fund, said Tuesday officials are still mulling whether a review is needed.

Yet the current policy gives managers sufficient flexibility to meaningfully reduce exposure before any review, according to the Santander team led by Antonio Villarroya, the bank’s global head of fixed-income, currencies and commodities strategy. The divestment risk is greatest for US Treasuries, they said.

“Given the flexibility of their strategic ranges, they could begin reducing foreign bond holdings in the coming months without waiting for a formal strategic asset-mix review,” Villarroya and his team wrote. This is especially likely “if the Bank of Japan is successful in reversing the weakness of the yen through back-to-back rate hikes.”

Japan is the largest foreign holder of US Treasuries with a $1.1 trillion stockpile. The GPIF’s current target is 25% in foreign bonds, with deviations of five percentage points permitted. Santander modeled reducing holdings to 20%.