Money Stock M2 in Japan

M2 measures the money held by Japan's non-bank private sector: currency in circulation plus deposits (demand, time and savings) and certificates of deposit at domestic banks. It is released monthly by the Bank of Japan; the former 'M2+CD' aggregate now corresponds to this M2.

It is computed as the average of daily outstanding balances over the month. The year-on-year growth rate compares that average with the same month a year earlier and is the figure usually tracked.

Sustained M2 growth points to more liquidity and spending power and is watched as a signal of medium-term price pressures and of the transmission of Bank of Japan policy. After years of ultra-low rates, its dynamics help gauge how effective monetary stimulus has been.

The link between M2 and inflation or activity has weakened, especially in Japan, making it an unreliable short-term signal. It does not capture broader aggregates (M3, L) or the velocity of money, and it rarely moves markets.