Data released by the Bank of Japan earlier today reveals that cash balance across the world’s third largest economy increased by more than 20% YoY during the month of March to hit a record high. The amount of money in circulation across Japan and deposits in the BOJ increased to 613.4 trillion yen, registering the fastest rise seen since February 2017.

The sharp spike in cash balance could be attributed to BOJ’s decision to purchase short-term securities and increased demand for the central bank’s loan scheme for companies affected by the coronavirus crisis. Deposits parked by financial institutions in the BOJ also surged by 25.1% to touch a record 492.5 trillion yen.

The BOJ is expected to continue with its monetary easing and increase the cash in circulation in a bid to boost domestic consumption and revive the economy. Even as external demand shows signs of improvement, there is still significant pressure on account of rising infections and slow COVID-19 vaccine rollout.

The BOJ has one of the loosest monetary policies among leading economies’ central banks worldwide, in a bid to reach its 2% inflation target, maintaining negative interest rates even before the pandemic. However, its insistence to continue with monetary easing has faced considerable criticism as it has failed to raise inflation and has even deeply affected banks’ profits.