The Bank of Korea (BOK) said on the 30th that it revamped its statistics on the "broad money supply (M2)" to meet International Monetary Fund (IMF) standards.
M2 can be seen as a concept of money supply that combines cash, cash-equivalent asset, and short-term financial products. Korea's M2 includes revenue securities such as exchange-traded funds (ETF), which major overseas countries do not include, and these will be excluded. They have been cited as a reason it looked like Korea's money supply was growing faster than abroad.
Accordingly, the M2 growth rate for Oct. fell to 5.2% from the previous 8.7%. But even with the revised statistics, the M2 growth rate remains higher than in major countries, prompting notes that liquidity in circulation is not small.
◇ Korea's M2 growth rate excluding revenue securities 5.2%... higher than U.S. 4.6% and Japan 3.1%
The Bank of Korea (BOK) said M2 excluding revenue securities was 4.056 quadrillion won in Oct., up 5.2% from a year earlier. Under the previous method that included revenue securities, M2 was 4.466 quadrillion won, up 8.7% on-year, meaning the overall scale fell and the growth rate also declined.
The latest revamp follows IMF recommendations. The IMF views revenue securities as having high price volatility, making it appropriate to exclude them from M2. The United States, Europe, and Japan all exclude them.
Still, Korea's M2 growth rate (5.2%) is higher than that of the United States (4.6%), Europe (3.1%), and Japan (1.6%). On this, the Bank of Korea (BOK) said it was "because of differences in monetary policy before and after COVID-19." Major countries expanded liquidity more aggressively than Korea during the spread of COVID-19, and as the pandemic calmed and they pursued tightening policies, their money supply growth slowed.
Korea cut the base rate twice in 2020 and then kept it on hold through the first half of 2024. It then lowered rates four times starting in Oct. 2024. From March 2020 to recently, Korea's cumulative M2 growth rate was 49.8%, actually lower than major countries such as the United States (43.7%).
Meanwhile, some items were newly included in M2. They are promissory notes with maturities within one year issued by comprehensive investment banks (mega-sized IBs) and promissory-note-type cash management accounts (CMA). Because these products are easy to cash and have almost no value fluctuation, they were newly added to M2.