Japan’s M3 money supply at record high as BOJ continues stimulus

Cash in circulation in Japan hit a record high after rising for 11 consecutive months in January, an encouraging sign that could point to a recovery in spending and its contribution to the economy. Japan’s M3 money supply increased 3.3% year-on-year to a record high of 1,534.5 trillion yen, although the pace of growth slowed from the previous month when it stood at 3 .4%.

However, the annual rate of increase has slowed to the lowest levels seen since April 2020, with the corresponding month last year seeing a sharp increase in filings. This was caused by households and businesses hoarding money as a result of government restrictions to contain the spread of infections.

The data is a key indicator of the total amount of money in circulation in the Japanese economy and is tracked by the Bank of Japan (BOJ) to observe consumption. One of the main drivers of the high levels of money supply is the massive BOJ monetary stimulus efforts that have been in place since the start of the pandemic, in an effort to boost spending efforts.


Even as several other major central banks begin to reverse their dovish stance and consider monetary tightening to offset soaring inflation, the BoJ remains committed to its ultra-loose monetary policy amid weak domestic spending weighing on the economy. With this in mind, the BOJ will continue to roll out more monetary stimulus initiatives and will continue to print more money in an attempt to revive its struggling economy.

Unlike its Western counterparts, Japan’s economy has failed to post a sharp rebound from the pandemic-induced crisis thanks to cautious consumers. Multiple waves of the COVID-19 pandemic and heightened uncertainty have made Japanese consumers reluctant to spend more, which has kept consumer inflation also low, even as the economy fails to pull a big punch. boost from rising consumer spending.

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