Reply To: Deflation in Japan


The money stock in a country is money proper plus money substitutes, i.e., on demand at par redemption claims for money.

In the U.S., the most accurate official measure of the money stock is MZM, i.e., money of zero maturity. M1 is too narrow (it doesn’t include all on demand at par redemption claims) and M2 is too broad (it includes credit instruments) and M3 has been discontinued.

Movements in M2 and M3, then are capturing part of the credit expansion instead of monetary inflation.

Here is the Bank of Japan statistics on M2 and M3 from 1980 to the present:$graphwnd_en

Here is the BOJ page on monetary statistics: