BOJ Balance Sheet Keeps Increasing, but Follow Through to Real Economy is Waning

The BOJ balance sheet has increased some 39% over the last year and the monetary base has increased about 46%. But, like in the US, the Japanese banks have just been parking their excess reserves right back at the BOJ. When we adjust the monetary base for the idle excess reserves, YoY growth is less than 3%. Bank loan growth has picked up to 2% YoY, but already the first and second derivatives have turned lower.