Japanese government bond yields may surge if Prime Minister Naoto Kan fails to carry out financial reforms, prompting an exodus of foreign money that had been drawn to the safety of the nation's assets, Barclays Capital Japan Ltd. said.

Stable returns, low volatility and ample demand create a "virtuous circle" that supports Japan's debt market, Tetsufumi Yamakawa, cohead of Japan research at Barclays in Tokyo, said in a forum Tuesday.

"The Greek and European debt crisis has drawn investor focus to the sovereign markets of many countries, and overseas investors aren't so bearish on JGBs," Yamakawa said.