Released Today: Japan's Monetary Base at ¥543.0 Trillion, YoY Decline Widens
Japan's monetary base stood at ¥543.0 trillion in August 2026, released today. This was a decrease of ¥11.9 trillion from the previous month (July 2026: ¥554.9 trillion). The year-on-year change was -15.7%, widening from -13.8% in July. According to BOJ statistics, the pace of quantitative contraction has accelerated recently.
[速報] Monetary Base: Decline Accelerates from July
The August decline in the monetary base was among the larger decreases seen in recent months. The ¥11.9 trillion decline from July to August exceeded the ¥4.3 trillion decrease from June to July (¥559.2 trillion → ¥554.9 trillion). The year-on-year decline also widened by 1.9 percentage points, from -13.8% to -15.7%, indicating that the BOJ's balance-sheet contraction policy is proceeding steadily.
This movement can be interpreted as evidence that quantitative tightening (QT), centered on reductions in government bond purchases, is continuing. The breakdown of the decline—current account deposits, banknotes in circulation, and currency in circulation—cannot be confirmed from these data. However, the fact that the balance itself has contracted by more than 15% from a year earlier supports the view that Japan is progressing toward an exit from the monetary easing phase.
[速報] Overnight Uncollateralized Call Rate: 0.977%, Normalization Continues
The uncollateralized overnight call rate was 0.977%. It was almost unchanged from July's 0.978%, effectively remaining at a high level. According to BOJ statistics, the call rate has risen steadily from 0.728% in January 2026, and in August stood approximately 0.25 percentage points above that level.
In particular, the rate jumped 0.137 percentage points from 0.841% to 0.978% between June and July, suggesting that a policy-rate hike may have been implemented during this period. In August, the rate remained at that level, indicating that short-term interest rates appear to be stabilizing within a new range.
Position of the Latest Data in the Past 12-Month Trend
The table below shows the monetary base and call rate trends together with the past 12 months.
| Month | Call O/N (%) | MB (¥tn) | MB YoY (%) |
|---|---|---|---|
| 2026-01 | 0.728 | 589.4 | −9.5 |
| 2026-04 | 0.727 | 582.9 | −11.3 |
| 2026-06 | 0.841 | 559.2 | −13.7 |
| 2026-07 | 0.978 | 554.9 | −13.8 |
| 2026-08 | 0.977 | 543.0 | −15.7 |
The table traces eight months in which quantitative contraction (a declining monetary base and a widening year-on-year decline) and rising interest rates have progressed in parallel. The balance declined from ¥589.4 trillion in January to ¥543.0 trillion in August, contracting by ¥46.4 trillion over this period. At the same time, the call rate rose from 0.728% to 0.977%, confirming that normalization is advancing in tandem on both quantitative and interest-rate fronts.
Relationship Between Tankan Business Sentiment and Financial Conditions
In the BOJ's June 2026 Tankan survey, the business conditions DI for large manufacturers was 22, improving for the fourth consecutive quarter from 14 in 2025 Q3. The nonmanufacturing DI also remained high at 37. However, the outlook DI was 14 for manufacturers and 29 for nonmanufacturers, both below current levels, indicating that businesses remain somewhat cautious about the outlook.
The DI for small and medium-sized manufacturers is also on an improving trend, rising from 1 in 2025 Q3 to 9 in 2026 Q2, although the level itself remains low compared with that of large companies. During a period of rising interest rates, sentiment among small and medium-sized enterprises, which are relatively more exposed to the impact of funding costs, will be an important reference point for gauging future call-rate developments. The key focus will be whether the next Tankan survey (September) shows changes in business sentiment reflecting higher interest rates.
Equity Market Response: TOPIX Maintains a Monthly Uptrend
TOPIX rose from 3961.78 at the beginning of August (August 4) to 4156.29 at month-end (August 31), generally maintaining a firm trend over the month. However, it plunged 3.09% from the previous day on August 19, at one point falling to 4012.31. Immediately afterward, it rebounded 1.18% on August 20.
The fact that TOPIX maintained an upward trend throughout August even as quantitative contraction and rising interest rates progressed indicates that tighter financial conditions have not immediately acted as a downward pressure on the equity market. However, the sharp drop on August 19 can be regarded as one example showing that the market remains sensitive to changes in interest rates and quantitative conditions. The rise continued after the start of September, with TOPIX closing at 4181.86 on September 1, confirming resilience across the month-end transition.
Outlook
The year-on-year decline in the monetary base has widened for eight consecutive months, making the key focus whether this contraction trend will continue from September onward. The call rate has remained elevated at 0.977%, and the next point of attention is whether any additional policy changes will be made.
The points to monitor going forward are as follows.
- Whether the release of August's money stock M2 data, following ¥1297.0 trillion in July, confirms that quantitative contraction is spilling over into money supply in the real economy
- Trends in the CGPI (135.8 as of July) and the impact of interest-rate and foreign-exchange conditions on prices
- The extent to which higher call rates have been passed through to the real economy when lending rates are next reported (1.383% as of January, followed by N/A)
- Changes in business sentiment in the September Tankan survey in light of rising interest rates
Based on the data currently available, the phase in which quantitative contraction and interest-rate normalization progress in parallel appears to be continuing. When the September data are released next, whether the pace of contraction accelerates or slows will be an important basis for assessment.
Glossary
| Term | Definition |
|---|---|
| Monetary base | The total amount of currency supplied by the Bank of Japan. It consists of cash in circulation and financial institutions' current account deposits held at the BOJ. |
| Uncollateralized overnight call rate | The interest rate applied when financial institutions lend overnight funds to one another without collateral. It is a representative short-term interest rate that reflects the actual level of the BOJ's policy-rate target. |
| Quantitative tightening (QT) | A central bank policy stance that reduces the amount of funds supplied to the market by shrinking its holdings of assets or unwinding monetary easing measures. |
| BOJ Tankan | The Short-Term Economic Survey of Enterprises in Japan conducted quarterly by the Bank of Japan. It gauges business sentiment through indicators such as the business conditions DI. |
| Business conditions DI | An index calculated by subtracting the percentage of companies reporting that business conditions are 'bad' from the percentage reporting that they are 'good.' |
| TOPIX | A stock-price index covering all issues listed on the Tokyo Stock Exchange Prime Market, also known as the Tokyo Stock Price Index. |
This column was automatically generated by AI integrating Bank of Japan statistics (monetary base, money stock, etc.), e-Stat public statistics, and market data as a monetary policy analysis resource. This is not a recommendation to buy or sell any financial instruments. Please make investment decisions at your own responsibility and consult professionals as needed.