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Japan's monetary base declines in Feb. for 2nd straight month

Xinhua, March 2, 2017 Adjust font size:

Japan's monetary base at the end of February dropped for the second successive month, the Bank of Japan (BOJ) said in a report on Thursday.

According to the central bank, the monetary base declined 0.4 percent standing at 433.66 trillion yen (3.8 trillion U.S. dollars) as of Feb. 28.

Compared to the same reporting period last year, the monetary base rose by 20.9 percent, the BOJ's data showed.

The balance of financial institutions' current account deposits at the central bank, which comprise the the largest component of Japan's monetary base, expanded 27.3 percent on year to 329.62 trillion yen, the BOJ also said.

Economists have said that the monetary base may increase henceforth, although the broader picture for the BOJ's inflation drive remains somewhat bleak.

The marginal increase in the monetary base, looking ahead, could partly be due to the the central bank's easing measures, involving purchasing government bonds annually to the tune of 80 trillion yen creating more market liquidity.

Japan's monetary base refers to the amount of currency that is either circulated in the hands of people living in Japan or in domestic commercial bank deposits held in the central bank's reserves.

This measure of the money supply typically only includes the most liquid currencies and the Japanese administration maintains a measure of control over the monetary base by buying and selling government bonds in the open market.

The monetary base includes all banknotes and coins in circulation plus all currency held as deposits by Japan's central bank.

As an official measure of the Japanese money supply, the monetary base shows the immediate impacts of monetary policy actions and can give an indication of the future direction of inflation.

An expansion in the monetary base is generally an indication of possible inflation as a result of policy actions, while a decline likely indicates the opposite effect.

The second consecutive decline in Japan's monetary base, as per the BOJ's latest data released Thursday, indicates the central bank is still grappling to reach its lofty 2 percent inflation target, the deadline of which has been extended multiple times. Endit