Money Supply Up 32 Trillion Won... Driven by Increased Stock Trading and Corporate Surplus Funds

Bank of Korea Reports Monetary and Liquidity Trends for May 2026

Former M2 Rises 11.7% Year-on-Year

In May, the amount of money circulating in the market increased by more than 32 trillion won, marking the sixth consecutive month of growth in the money supply.

According to the "Monetary and Liquidity Trends for May 2026" released by the Bank of Korea on July 15, the seasonally adjusted average balance of the broad money supply (M2) in May stood at 4,184.4 trillion won, up 32.2 trillion won (0.8%) from the previous month. On a non-seasonally adjusted basis, this represented a 5.8% increase compared to the same month last year.

M2 is a broad measure of the money supply that includes cash, demand deposits, and money in savings accounts that can be withdrawn at any time (M1), as well as money market funds (MMFs), time deposits and installment savings with maturities under two years, certificates of deposit (CDs), and repurchase agreements (RPs).

The former M2 average balance, which also includes beneficiary certificates, rose by 2.2% from the previous month and 11.7% from the same month a year earlier. Beneficiary certificates jumped 61.7% compared to May last year, contributing a 6.1 percentage point increase to M2, according to the analysis.

By product, savings deposits that allow free withdrawals increased by 24.3 trillion won. A Bank of Korea official explained, "This was due to an expansion in corporate short-term surplus funds, as well as increased fund management by some other financial institutions in the securities and derivatives markets." Monetary trusts with maturities under two years also saw a 3.8 trillion won increase, driven by deposit inflows from semiconductor companies.

By economic entity, non-financial corporations recorded an increase of 30.1 trillion won, other financial institutions increased by 11.8 trillion won, and the "other" sector (including social security organizations and local governments) by 3 trillion won. In contrast, households and nonprofit organizations saw a decrease of 19 trillion won.

The seasonally adjusted average balance of narrow money (M1) was 1,398.2 trillion won, a 1.9% increase from the previous month. The non-seasonally adjusted figure was up 10% year-on-year.

Liquidity at financial institutions (Lf, average balance) stood at 6,309 trillion won, up 1.4% from the previous month, while broad liquidity (L, end-of-month balance) reached 8,053.8 trillion won, a 1.1% increase compared to the end of the previous month.

The scope of Lf includes not only M2, but also long-term financial products with maturities of two years or more and financial products issued by non-deposit-taking institutions. Meanwhile, L encompasses Lf as well as other financial institution products, government bonds, local government bonds, corporate bonds, and commercial paper.

Yonhap News Agency

This content was produced with the assistance of AI translation services.