The growth of M2+CDs, a representative indicator of monetary aggregates in Japan, remained stable at around the annual growth rate of 3 percent until early autumn, but rose sharply after November, marking an annual increase of 5 percent in February 1998, the first time in the approximately seven years.5 This reflected the shift of funds into M2+CDs from financial assets outside M2+CDs such as investment trusts, and also the buildup of corporate deposits as firms deposited the funds raised in advance by bonds and CP to secure liquid funds.
From early March, however, the annual growth in M2+CDs fell slightly. Meanwhile, private-sector financial institutions showed stronger movement to reduce risk assets including lending in the second half of fiscal 1997, as capital constraints were intensified by the fall in stock prices just when risk management was being strengthened prior to the introduction of the Prompt Corrective Action.