M2 Money Supply YoY

M2 Money Supply YoY is the 12 month % change in M2 (broad yen money) from Money Stock Statistics. Money Stock Statistics has run since 1955, and the current series starts in April 2003 after the June 2008 revision.

M2 sums currency in circulation (banknotes and coins held by money holders) plus deposits at domestically licensed banks, etc. Money holders are resident households, nonfinancial firms and local governments only; the central government, financial firms and nonresidents are excluded. It excludes Japan Post Bank deposits (counted in M3), the monetary base and L (broadly-defined liquidity).

The reference period is 1 calendar month, and the headline is average amounts outstanding (monthly average holdings) for that month. Preliminary inquiry data are due at 10 AM on the 4th business day after the reference month.

Preliminary M1, M2, M3 and L averages are released on the 7th business day after the month, except March and September on the 9th. Final averages are released on the 7th business day of the 2nd following month, except February and August on the 9th. All figures are released at 8:50 JST (Japan time).

Each release shows original averages with percent change from a year earlier and adjusted levels at an annualized rate. Final figures are revised retroactively, and adjusted figures are revised from the start with each March release. L components are reviewed every 3 years in principle.

M2 rises when households and firms hold more cash or deposits, and falls when they shift funds elsewhere.

• Currency in circulation: banknotes and coins held by money holders, excluding financial institutions and the central government.
• Deposit money: demand deposits at M2 issuers, excluding checks and notes held by financial institutions and securities and tanshi firms.
• Quasi-money (time and savings balances): time deposits, fixed and installment savings plus resident foreign currency deposits, net of estimated securities holdings.
• CDs (certificates of deposit): negotiable certificates issued by M2 issuers and held by money holders, tracked by initial buyer.

A Bank of Japan guide example shows why base effects (prior year distortions) matter, using former M2+CDs (the direct predecessor of M2). Flight from investment trusts to deposits after institutional failures lifted YoY from 3.2% to 5.0% from November 1997 to February 1998. From November 1998 to February 1999 YoY fell from 4.3% to 3.4% while money levels still rose, because the prior base was inflated. So YoY can fall while money still expands; read levels and adjusted monthly change alongside YoY.

1. Average outstanding: Compile monthly average holdings for each M2 component from bank reports and inquiries. Small issuers are estimated from the prior month plus the prior year change to preserve seasonality. Where only month end stocks exist, use Avg = (End current month + End prior month) / 2.
2. M2 level: Add currency, deposit money, quasi money and CDs on a money holder basis in yen average outstanding.
3. YoY growth: Subtract the same month 12 months earlier, divide by that base and multiply by 100. Symbols: g = (M2 current - M2 12 months ago) / M2 12 months ago x 100 (%).
4. Illustrative example: For example, M2 at 1,295.0 trillion yen against 1,270.0 trillion yen a year earlier gives growth of (1,295.0 minus 1,270.0) divided by 1,270.0. Multiply by 100 to get about 2.0%.
5. Seasonal adjustment (separate series): Seasonal adjustment creates a separate series with X-12-ARIMA in log form. Divide the original M2 by the seasonal factor, then compare months; models are revised yearly with the March release.