Japan’s households, firms keep saving despite signs of recovery from pandemic’s scar

FILE PHOTO: Pedestrians wearing protective masks amid the coronavirus disease (COVID-19) outbreak, walk on a street in Tokyo, Japan, February 2, 2021. REUTERS/Kim Kyung-Hoon

By Leika Kihara

TOKYO (Reuters) - Japan’s currency in circulation and bank deposits hit a record in March, data showed on Tuesday, a sign households and companies have continued to pile up savings despite signs of improvement in the economy.

The data highlights how the world’s third-largest economy is struggling to fully emerge from the devastation of the COVID-19 pandemic, with slow vaccine rollouts and sluggish consumption clouding the outlook.

Japan’s M3 money stock - or currency in circulation and deposits at financial institutions - rose 8% in March from a year earlier to a record 1.49 quadrillion yen ($13.61 trillion), Bank of Japan data showed.

The increase matched the pace of gain in February.

Bank deposits surged 15.2% in March from a year earlier, while currency in circulation rose 6.2%, the data showed.

“Bank deposits continue to see strong growth. Households are holding off on spending, while companies continue to hoard cash as a precaution,” Takashi Nagahata, head of the BOJ’s economic statistics division, told a briefing.

Japan’s economy rebounded from last year’s record postwar slump thanks to robust exports, which helped boost business confidence to pre-pandemic levels.

But analysts expect any recovery to remain modest as a resurgence in COVID-19 infections weighs on household spending.

(Reporting by Leika Kihara. Editing by Gerry Doyle)