June Call Volume 3,077 Trillion... 9% Increase Year-on-Year for 3 Consecutive Months

Bank of Korea 'Monetary and Liquidity Conditions in June 2020'

[Asia Economy Reporter Kim Eunbyeol] The shock of the novel coronavirus infection (COVID-19) has rapidly increased the money supply in circulation. For three consecutive months, the year-on-year growth rate has remained in the 9% range, with the money supply in circulation reaching an all-time high.

According to the "Monetary and Liquidity Statistics for June 2020" released by the Bank of Korea on the 13th, M2 (broad money) in June reached 3,077.1 trillion KRW (seasonally adjusted average balance), an increase of 0.8% compared to the previous month. In terms of amount, this is an increase of 23.2 trillion KRW. Based on the original series average balance, it increased by 9.9% compared to the same month last year.

M2 is an indicator showing the broad money supply, including cash, demand deposits, various savings deposits, money market funds (MMF), and time deposits with maturities under two years. Long-term financial products with low liquidity are excluded.

A Bank of Korea official explained, "M2 increased as credit supply centered on the corporate sector continued." Looking at M2 by economic agents, households and non-profit organizations increased by 16.9 trillion KRW, and corporations increased by 9.1 trillion KRW. Other financial institutions (+2.7 trillion KRW) increased, but other sectors (-5.6 trillion KRW) decreased.

By financial product, demand savings deposits increased by 14.4 trillion KRW, mainly in the corporate sector, due to quarter-end financial ratio management and securing settlement funds. Demand deposits also increased by 6.2 trillion KRW. On the other hand, as interest rates fell, the incentive to reinvest matured deposits decreased, and time deposits under two years decreased by 4.8 trillion KRW.

Compared to May, the increase in M2 slowed, but the year-on-year growth rate (based on the original series) maintained a high rate of 9.9%. The year-on-year growth rate of M2 in June was 9.9%, continuing the same growth rate as in May. The year-on-year growth rate of M2 expanded to the 7% range from last September to January, then sustained in the 8% range from February, and expanded to the 9% range in April.