Meanwhile, the decline in crude oil prices will have positive effects on economic activity and push up prices over the longer-run. Nevertheless, given the fact that Japan’s economy is currently in a transition process of converting the deflationary mindset, prolongation of the current downward pressure on prices, albeit temporarily, was judged to run the risk of delaying the process.
A number of factors, possibly related to the intensification of tensions in some financial markets, could have had an upward effect on the components of M3. In particular, sizeable inflows into overnight deposits and money market fund shares/units, as well as a substantial inflow into repurchase agreements, appear to have driven monetary developments in August.