TOKYO (Reuters) - Japan’s currency in circulation and bank deposits rose at a record annual pace in August as companies and households continued to pile up cash to guard against the coronavirus- driven income slump, central bank data showed on Wednesday.
The data underlines the difficulty of prodding companies and households to start spending again, even as the economy gradually re-opens after lockdown measures were lifted in May.
Japan’s M3 money stock - or currency in circulation and deposits at financial institutions - rose 7.1% in August from a year earlier, marking the biggest increase since comparable data became available in 2004, Bank of Japan data showed. The rise topped a 6.5% gain in July.
Bank deposits surged a record 15.3% in August from a year earlier, as the hit to sales from COVID-19 prompted companies to continue to hoard cash as a precaution.
Cash in circulation rose 5.5% in August, matching the pace of gain in July, the data showed.
“Some households may be holding cash at home instead of parking them in bank accounts, as the pandemic makes them cautious of visiting bank branches, a BOJ official told a briefing.
Japan’s economy sank deeper into its worst postwar contraction in the second quarter as the coronavirus jolted businesses more than initially thought, data showed on Tuesday, underscoring the daunting task policymakers face in averting a steeper recession.
Reporting by Leika Kihara, additional reporting by Chris Gallagher & Shri Navaratnam
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