Sunday, December 10

Japan’s cash in circulation slows to decade-low pace on waning COVID fund demand

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TOKYO — Japan’s monetary base, or the amount of cash circulating in the economy, grew in August at the smallest annual pace in a decade, data showed on Friday, a sign of waning corporate demand for funds to cope with the COVID-19 pandemic.

The slowdown reflects shrinking demand under the Bank of Japan’s pandemic-relief scheme, which was created in 2020 to ease funding strains caused by the crisis. It may prod the central bank to end as scheduled the scheme that expires at the end of this month.

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A decision on whether to terminate the scheme or extend the deadline will be made at the BOJ’s next meeting on Sept. 21-22.

The average balance of monetary base in August rose 0.4% from a year earlier to 659.7 trillion yen ($4.71 trillion), slowing sharply from a 2.8% gain in July, BOJ data showed. It was the smallest year-on-year increase since April 2012.

The monetary base is likely to post year-on-year declines in coming months, as funds offered under the BOJ’s scheme have been decreasing recently reflecting the economy’s recovery.

Some analysts say any such decline would conflict with the BOJ’s pledge to keep increasing the balance of monetary base until inflation “stably” exceeds its 2% target.

The BOJ currently targets interest rates, not the pace of money printing. But the pledge on monetary base was included in its policy guidance to reinforce its resolve to maintain its massive stimulus program to support the economy.

Japan’s core consumer inflation exceeded 2% for four straight months in July. But BOJ Governor Haruhiko Kuroda has said inflation has yet to reach the central bank’s target on a “sustained, stable” basis, as recent price rises were driven mostly by rising fuel costs rather than robust demand.

($1 = 139.9400 yen) (Reporting by Leika Kihara; Editing by Jacqueline Wong)