TOKYO, Jan 6 (Reuters) – Japan’s monetary base, or cash in circulation, declined for the first time in 18 years in 2025 as the central bank weaned off massive policy support, data showed on Tuesday, a trend that is likely to persist as it proceeds with policy normalisation.<\/p>\n
The Bank of Japan (BOJ) ended a decade-long stimulus in March 2024, consisting of huge asset buying, negative short-term interest rates and a bond yield control, citing that the economy was on the cusp of sustainably achieving its 2% inflation goal.<\/p>\n
Sign up here.<\/a><\/p>\n It has since slowed purchases of Japanese government bonds (JGB) and terminated a funding scheme that incentivised financial institutions to boost lending.<\/p>\n Reflecting such moves, the average balance of monetary base in 2025 dropped 4.9% year-on-year, marking the first fall since 2007, when the BOJ was embarking on its previous rate-hike cycle, data showed.<\/p>\n The average balance of monetary base in December stood at 594.19 trillion yen ($3.79 trillion), down 9.8% from a year ago, and falling below the 600 trillion-yen mark for the first time since September 2020.<\/p>\n Analysts expect Japan’s monetary base to continue falling as the BOJ proceeds with bond tapering and rate hikes.<\/p>\n With inflation surpassing BOJ’s 2% target for nearly four years, the central bank raised short-term rates to 0.75% from 0.5% in December.<\/p>\n Governor Kazuo Ueda stressed the bank’s readiness<\/a> to continue raising rates if economic and price developments move in line with its forecast.<\/p>\n ($1 = 156.6500 yen)<\/p>\n (This story has been corrected to say ‘March 2024,’ not ‘last year,’ in paragraph 2)<\/p>\n Reporting by Leika Kihara; additional reporting by Takahiko Wada; Editing by Sumana Nandy<\/p>\n Our Standards: The Thomson Reuters Trust Principles., opens new tab<\/a><\/p>\n