Japan's monetary base fell 15.2% in September as reserves shrank
Serguey Asael Shinder1 min readJapan's monetary base fell 15.2% in September from a year earlier, the Bank of Japan reported on 2 October. The average amount outstanding was ¥532.8 trillion, down from ¥543.0 trillion in August.
The decline comes almost entirely from current account balances, the deposits financial institutions hold at the central bank. They averaged ¥413.7 trillion in September, 18.3% lower than a year earlier; within them, reserve balances were down 17.3%. Banknotes in circulation, at ¥114.6 trillion, were 2.0% lower, and coins 1.2% lower. On a seasonally adjusted basis the base fell at an annualised rate of 10.2% from August.
September's annual fall was slightly smaller than August's 15.7%, the steepest in the series the Bank published this month, but the trend is clear from the quarterly figures. The year-on-year decline widened from 3.9% in the second quarter of 2025 to 8.7% in the fourth, 10.6% in the first quarter of 2026, 12.4% in the second and 14.9% in the third. Current account balances, which fell 5.3% a year earlier in the third quarter of 2025, were down 17.9% in the third quarter of this year.
The release does not explain the drivers. The shrinking current account balances are consistent with the Bank's gradual reduction of its government bond purchases, under which maturing bonds are not fully replaced and the reserves created by past purchases drain away. At the end of September the base stood at ¥535.4 trillion.
Why it matters
The monetary base is the most direct measure of how far the Bank of Japan has unwound its balance sheet. A 15% annual fall shows the reduction now running at a pace well beyond the early stages of tightening, even before any further rate decisions.