The average balance of broad money (M2) in June was 4,213 trillion won, up 29.4 trillion won from the previous month, the Bank of Korea said on the 14th. Although the increase was smaller than the previous month's 32.2 trillion won, the year-over-year growth rate was 6%, the highest in 41 months since February 2023 during the COVID period. As major corporations that posted record-high results on the back of strong semiconductor exports placed surplus funds with banks, the amount of currency in circulation increased.
M2 refers to the amount of currency in circulation. It is the sum of narrow money (M1)—such as demandable savings deposits like payroll accounts and demand deposits with free withdrawals—and comprehensive asset management accounts (CMA), money market funds (MMF), and time savings and installment savings of less than two years. When M2 increases, it tends to drive up prices.
According to "June currency and liquidity" released by the Bank of Korea on the same day, time savings and installment savings of less than two years increased by 7.1 trillion won, reversing from a 4.7 trillion won decrease the previous month. During the same period, money market funds (MMF) doubled to 7.3 trillion won.
In particular, semiconductor corporations are understood to be depositing surplus funds in money trusts with maturities of less than two years. A money trust is a product in which a bank manages assets on behalf of clients, such as purchasing corporate bills or corporate bonds.
By sector, M2 held by nonfinancial corporations increased by 45.7 trillion won, and other financial institutions rose by 5.4 trillion won. Households and nonprofit organizations fell by 19.8 trillion won, and social security funds and local governments decreased by 1.1 trillion won.
The old M2 balance, which includes revenue securities such as exchange-traded funds (ETF), was 4,843.7 trillion won, up 59.4 trillion won (1.2%) from the previous month. It was up 12.3% from the same month a year earlier. The Bank of Korea changed its statistical standard starting in November last year to exclude revenue securities from M2.
Meanwhile, M1 was 1,402.9 trillion won, up 5.6 trillion won (0.4%) from the previous month. It increased 10% from the same month a year earlier.