Physiological umbilical hernia reduces because:-

During the 6th week, the primary intestinal loop grows rapidly, as a result of rapid growth and expansion of liver, the abdominal cavity temporarily becomes too small to contain the loops of intestine and they enter to the extra embryonic coelom forming the physiological umbilical hernia. During the 10th week of development, the herniated intestinal loops sta to return to abdominal cavity. Although the factors responsible for it are not known, it is thought that regression of mesonephric kidneys, reduced growth of liver and expansion of abdominal cavity play impoant role.