frequently uses funds-absorption operations on a day (or in a month) of funds surplus, which is caused by the treasury funds factor. These funds-absorption operations are sometimes misinterpreted as monetary tightening. In order to avoid such misunderstandings, it is useful to break down items of the balance sheet clearly by the type of transaction and to show the relationship between the monetary base and each type of transaction.
As described above, "Monetary Base and the Bank of Japan's Transactions" explains the movement of the monetary base, which consists mainly of banknotes and current account balances, in terms of changes in the Bank's other assets and liabilities. It can be created by reconstructing the balance sheet of the Bank.
Specifically, the statistics can be compiled by the following steps. First, compute the monetary base by extracting "banknotes in circulation" and "current deposits at the Bank of Japan" from the Bank's balance sheet, and adding coins in circulation.2 Second, reconstruct assets, liabilities other than banknotes and current deposits at the Bank, capital accounts, and coins in circulation so that the total matches with the monetary base derived in the first step. Third, break down each item of the balance sheet and reorganize by the type of transaction conducted by the Bank (please refer to the Appendix).
As "Monetary Base and the Bank of Japan's transactions" is created by reorganizing the balance sheet, the statistics are based on stock figures ("stock table"). For convenience, figures indicating the increases/decreases in stock figures ("flow table") are also calculated and provided.
"Monetary Base and the Bank of Japan's Transactions" has the following features compared to the balance sheet of the Bank and the funds-tables.
The balance sheet of the Bank of Japan records the state of assets, liabilities, and capital accounts according to the accounting rules. However, it is difficult to obtain from it an overall picture of the various transactions conducted by the Bank.
In "Monetary Base and the Bank of Japan's Transactions," for example, the relationship between JGB transactions and the monetary base is clearly shown by indicating the types of JGB transactions through which the Bank has obtained JGBs.
The funds-tables are compiled in order to show exactly how current account balances are determined by issuance/redemption of banknotes ("banknotes"), receipts/payments of treasury funds and other transactions ("treasury funds and others"), and the Bank's market operations. However, the funds-tables focus on movements of the current account balances as their main aim is to make daily market operations easy to understand.
"Monetary Base and the Bank of Japan's Transactions" is constructed in such a way that, for example, it shows clearly how the issuance of banknotes or receipts/payments of treasury funds correspond to increase/decrease in the monetary base.
Each month's "Monetary Base and the Bank of Japan's Transactions" will be published at 8:50 a.m. on the sixth business day of the following month as hard copies and on the Bank's Web site. It will also be published in the Financial and Economic Statistics Monthly, as soon as this is ready.
For further information, contact
Planning Division I, Policy Planning Office
Mr. Shimizu (+81-3-3277-2812) or Mr. Watanabe (+81-3-3277-1553)
Relationship between "Monetary Base and the Bank of Japan's Transactions" and the Bank's balance sheet