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Introduction of Periodical Revision of Broadly-defined Liquidity

March 8, 2004
Bank of Japan
Research and Statistics Department

In the Money Stock Statistics, the data for broadly-defined liquidity (excluding M2+CDs) is revised whenever there is much room for improvement on its accuracy. A fundamental revision was implemented in June 2000. Three and a half years have passed, however, since that revision, and the following changes have occurred since then:

1) The statistical accuracy of estimation using the present base data has declined over time.

2) Japan's financial economic structure has changed (e.g. new financial products have emerged).

3) New data sources have become available with the progress in financial disclosure and establishment of new statistics.

The Bank of Japan has decided to revise broadly-defined liquidity, to be released in June 2004, to reflect the above changes.

Broadly-defined liquidity is compiled based on various estimates, which are calculated using data with a specific base year as a benchmark. Thus, the gradual decline of statistical accuracy over time is unavoidable. The Bank of Japan has therefore decided to change the revision rule for broadly-defined liquidity. It should be recalled that we do not change the current rule of revision when there is much room for improvement on statistical accuracy. In addition to the current rule, we introduce the new rule: the necessity of revision will be carefully examined on a regular basis: basically once every three years, in June.

The details of the current revision are as follows.

A. Investment Trusts

1) The adjustment method for the amount outstanding of investment trusts held by financial institutions that are deduction items will be refined.

2) Data for real estate investment trusts (J-Reit) will be newly included, in addition to the existing data on bond investment trusts and stock investment trusts.

B. Repurchase Agreements and Securities Lending with Cash Collateral

Data of Securities Lending with Cash Collateral: All securities companies will be included, expanding the coverage from the current 40 major security companies.

C. Government Bonds

1) The adjustment method for the amount outstanding of government bonds held by financial institutions that are deduction items will be refined.

2) The adjustment method of the repurchase agreements and securities lending with cash collateral using government bonds will be refined.

D. Foreign Bonds

The base year for the base data used for the calculation will be updated every year, from the current method of using the fixed benchmark, the amount outstanding as of end-1999. The calculation method of accumulating transaction flows to the benchmark will be unchanged.

For any inquiries, please contact:

Financial Statistics Group
Research and Statistics Department
Bank of Japan

Fax : +81-3-3277-3013
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