In contrast to the European Central Bank and the Federal Reserve, the Bank of Japan has so far shown no willingness to abandon its loose monetary policy.

But one number now makes you sit up and take notice.

For the first time since 2008, the state promissory notes on the central bank's balance sheet shrank last year.

Is this a move away from quantitative easing aimed at pumping more money into the economy?

The business newspaper "Nikkei" already writes of a secret tightening of monetary policy.

Patrick Welter

Correspondent for business and politics in Japan, based in Tokyo.

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At the end of 2021, the Bank of Japan held government promissory notes worth 521 trillion yen (EUR 4 trillion). That was 14.4 trillion yen less than a year earlier. In 2008, when the national debt on the central bank's balance sheet fell for the last time, the cautious Masaaki Shirakawa was still in charge of monetary policy. In 2013 Haruhiko Kuroda took over the office of governor. He led Japan into a drastic expansion of the monetary base to drive out the deflation bacillus. The main means of doing this was through quantitative easing in the form of the purchase of government bonds, which peaked at around 80 trillion yen a year. The shrinking national debt on the balance sheet now seems to indicate that the Bank of Japan is moving away from the course of monetary expansion despite all of Kuroda's assertions to the contrary.

Economists from commercial banks disagree.

They emphasize that in 2021 only the T-bills with a maturity of up to one year on the central bank's balance sheet decreased because the government demanded fewer short-term transactions.

That has no significant impact on monetary policy, comments the chief economist of Deutsche Bank in Japan, Kentaro Koyama, in an analysis.

The longer-dated government bonds on the central bank's balance sheet rose by 13.5 trillion yen.

The plus is lower than it has been since Kuroda's inauguration in 2013.

Since the central bank allowed itself more flexibility in March under the sign of the pandemic, it has significantly reduced its purchases of government bonds.

Confusion among investors is inevitable

The bank reduced its purchases of listed equity funds (ETF) even more aggressively. In 2021 she only bought ETFs worth 1 trillion yen, mostly in the spring. The stock market has coped well with withdrawal from the monetary drug. In September the Nikkei index hit a thirty-year high and closed the year up 4.9 percent. The Bank of Japan drastically expanded its corporate loans in 2021. This pandemic emergency aid will only be partially continued from April onwards. According to calculations by Deutsche Bank and Morgan Stanley MUFG, the monetary base will shrink by up to 55 trillion yen starting in April.

It is unclear whether and how quickly the minus will be offset by new loans.

Confusion among investors as to whether the bank is tightening its monetary policy is inevitable, as is possible distortions in the exchange rate.

Takeshi Yamaguchi of Morgan Stanley MUFG points out that the bank promises to expand the monetary base until inflation has reached a stable target of 2 percent.

Yamaguchi also emphasizes that the bank has been following interest rate control since 2016 and has given up quantitative easing.

The discussion about the lower sovereign debt on the central bank balance sheet suggests that the change in the markets has not yet been internalized.