Bank of Japan's L Money Stock y/y reflects the entire quantity of money circulating in the country's economy. The index reflects money stock changes in the given month compared to the same month a year ago.
The L Money Stock includes cash and residual assets which enterprises and individuals can use for making payments, deposits at depository institutions, time deposits (i.e. the M3 Money Stock) and additional components which have any liquidity. These include pecuniary trusts, investment trusts, straight bonds issued by banks, bank debentures, government securities and foreign bonds.
The calculation is aimed to cover the entire quantity of money held by private households, non-financial corporation, local governments and municipal enterprises. The calculation does not include deposits, etc. held by the central government, depository institutions, insurance companies, government financial institutions, bank and insurance holding companies, as well as by non-residents.
The money stock structure is constantly changing. For example, the proportion of cash is reduced.
The L Money Stock indicator characterizes inflation in the country. Excess money supply growth potentially can cause inflation and generate fears that the government may tighten money growth by allowing the interest rates to rise, which in turn lowers future prices. In Japan, decisions by the Bank of Japan to increase the volume of the Japanese yen may not necessarily lead to inflation, as many Japanese tend to save money, and in particular the elderly tend to prefer cash savings, which are called "Tansu Yokin".
A higher than expected index can be seen as positive/bullish for JPY, but this relationships is not considered reliable.
The chart of the entire available history of the "Bank of Japan (BoJ) L Money Stock y/y" macroeconomic indicator. The dashed line shows the forecast values of the economic indicator for the specified dates.
A significant deviation of a real value from a forecast one may cause a short-term strengthening or weakening of a national currency in the Forex market. The threshold values of the indicators signaling the approach of the critical state of the national (local) economy occupy a special place.
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