As Volatility Increases, 'Investment on Hold'... Market Money Supply Rises for 19 Consecutive Months

Money Supply (M2) Averaged 4,183.5 Trillion Won in December Last Year
Up 1.0% from Previous Month...19 Consecutive Months of Growth

The money supply in circulation has shown an increasing trend for 19 consecutive months. As volatility in the asset market grew, investment standby funds increased, leading to the expansion of demand deposit savings and other similar deposits.

On the 5th, officials are supplying Chuseok currency at the Bank of Korea Currency Deposit Office in Jung-gu, Seoul. Photo by Joint Press Corps

According to the Bank of Korea on the 13th, the average balance of broad money (M2) on a seasonally adjusted basis in December last year was 4,183.5 trillion won, an increase of 40.5 trillion won (1.0%) compared to the previous month. M2 has been on an upward trend for 19 consecutive months since June 2023. M2 is a broad monetary indicator that includes narrow money (M1) such as cash, demand deposits, and demand deposit savings, as well as money market funds (MMF), time deposits under two years, beneficiary certificates, and repurchase agreements (RP).

By financial product, demand deposit savings and other monetary products increased by 18.6 trillion won and 5.7 trillion won respectively compared to the previous month. Demand deposit savings expanded in size due to an increase in corporate funds inflow for financial ratio management and investment standby funds caused by increased asset market volatility. Other monetary products increased due to a rise in foreign currency deposits from export transaction proceeds.

On the other hand, time deposits decreased by 4.6 trillion won. A Bank of Korea official stated, "Withdrawals of funds for local government fiscal execution and banks’ early procurement in preparation for large-scale maturity of time deposits in the fourth quarter of last year had an impact."

By sector, the money supply of households and non-profit organizations increased by 10.2 trillion won, mainly in demand deposit savings and demand deposits. Corporations increased their money supply by 31.5 trillion won, centered on demand deposit savings, demand deposits, and other monetary products. Other financial institutions increased by 3.9 trillion won, mainly in demand deposit savings and time deposits under two years, and other sectors increased by 5.4 trillion won, mainly in MMFs.

The average balance of narrow money (M1) was 1,274.3 trillion won, increasing by 25.4 trillion won (2.0%) compared to the previous month, mainly due to demand deposit savings and similar deposits.

This content was produced with the assistance of AI translation services.