Money & Cycles Weekly Bulletin
Deflationary Japanese money trends
March 17, 2025 by Simon Ward
- Japanese annual money growth fell further to another post-GFC low (see charts).
- With monetary conditions bearing down on nominal demand, another strong pay award in the spring Shunto will likely be offset by a contraction in overinflated profit margins (see charts).
- Chinese six-month money / credit growth stabilised after a recent recovery, while activity numbers were respectable (see charts).
- US business money holdings recovered in Q4 but annual growth remained weak, suggesting capex / hiring restraint (see charts).
- UK / German job postings are signalling further labour market deterioration (see charts).
High Japanese annual all-items consumer price inflation reflects strength in food and energy prices, with adjusted core at 1.6% and trending weaker:
Annual growth of narrow money M1 and broad money M3 fell to 0.8% and 0.6% respectively in February, the lowest since 2008-09, suggesting coming weakness in nominal demand:
Shorter-term growth shows no sign of recovery:
Money growth was dragged down last year by record f/x intervention and Bank of Japan QT. The intervention drag has ended but has been replaced by a slowdown in credit to other sectors:
The first-round rise in base pay in this year’s Shunto was slightly higher than last year:
Restrictive money conditions suggest that higher labour costs will be absorbed by profit margins, which have been inflated to a 50-year high by yen weakness (now reversing?):
Six-month growth of Chinese money and credit stabilised in February:
Chinese real narrow money growth rose slightly further, reflecting CPI weakness:
The PBoC expanded its balance sheet again, with lending to banks reaching a new high:
The recovery in economic momentum in late 2024 carried over into January / February, although home sales cooled:
US annual headline / core CPI inflation moderated, with the shelter component trending lower:
US business money holdings recovered in Q4 but annual growth remained weak, suggesting capex / hiring restraint:
UK home-buyer demand has weakened sharply, signalling a likely fall in mortgage applications:
Timely job postings numbers from Indeed suggest that labour market deterioration has resumed following a pause around year-end:
Financial analysts surveyed by Sentix have turned bullish on German economic prospects, suggesting a pick-up in Ifo expectations, though probably to a much lesser extent:
Meanwhile, Indeed numbers indicate that – as in the UK – labour market conditions have taken a turn for the worse:
