Economics, Meta Intelligence

Japan-Watching: Yen Repatriation Starts with the Whale

GPIF, one of the largest national pension funds in the world, is likely to rebalance its assets from non-yen bonds to yen bonds, signaling a big turn in Japan’s cross-border capital flows.

[from Japan Macro Advisors, 10 September, 2026]

Key takeaways

In 2013, GPIF’s investment committee, chaired by UEDA Kazuo [植田和男], now the BoJ governor, saw a fair chance of a JGB crash within five to ten years. Its CEO priced the crash as the 10-year rising from 0.5% to 3%. Subsequently, GPIF cut its target weight for domestic bonds from 60% to 25% as an emergency measure against abnormally low yields.
The 10-year is now at 3%. On my replication of GPIF’s own allocation rule, a real return on JGBs near zero points to a 50% weight in domestic bonds, against 25% today. I expect GPIF to raise the weight, if it has not already started in the September quarter.
How GPIF decides its asset allocation and communicates it publicly is a very delicate and political issue. But regardless of how it communicates it, a change in asset allocation is inevitable. In my view, it signifies a big turn in Japan’s cross-border capital flows.

Japan has one of the Largest Pension Funds in the World

Japan has the second largest public pension fund in the world. Norway’s is the biggest, although it is not strictly a pension fund. Canada’s pension funds, when all eight of its variants are added together, come a close third.

Japan set up its first national pension fund in 1961 and it has since gone through various reforms and reorganization over the last 65 years. Its current form is called the Government Pension Investment Fund (GPIF). As explained in a later section, GPIF has a few siblings, and when we add them together, Japan’s public pension funds can be said to be the largest in the world.

Chart 1

GPIF used to invest most of its asset into JGBs

GPIF used to invest the majority of its fund as loans to the national government and into Japanese government bonds (JGBs). At the end of FY2012, 62% of its assets consisted of domestic bonds. However, in 2014 it went through a radical asset reallocation and the target weight for domestic bonds was reduced from 60% to 35%, and then further down to 25% in 2020. Its current target allocation is a clean four-way 25% split into domestic bonds, domestic equity, foreign equity and foreign bonds.

As one of the largest pension funds in the world, its asset allocations attract market attention and there is speculation that it is about to raise its allocation into domestic bonds. In my view, there is indeed a very high chance that GPIF will be raising its allocation into domestic bonds, if it has not already started to do so in the current quarter ending in September 2026.

Chart 2

UEDA in 2013 Saw a Bond Crash Coming

To understand why GPIF is highly likely to raise its allocation into domestic bonds, we need to go back in history to 2013. Why 2013? Of course, it is the year the Bank of Japan (BoJ) started its massive quantitative easing. The 10-year JGB yield started 2013 at 0.8% and it fell to 0.3% by the end of 2015 before briefly hitting a negative rate of -0.3% in 2016. If you were the chairperson of the GPIF investment committee, you would have been concerned about the wisdom of continuing to invest in JGBs at such a policy-driven low rate. The actual chairperson was UEDA Kazuo [植田和男], the current BoJ governor. In the minutes for October 2013, UEDA said, “I think there is a fair chance that bonds will crash at some point in the next five to ten years [unofficial translation].”

The minutes were released only seven years later; otherwise the use of the word “crash” would have been controversial.

GPIF CEO Priced the Crash at 3% in 2014. We Are There Now

If you read through the GPIF minutes between 2013 and 2014, you would see that GPIF officials were increasingly conscious of the precariousness of investing in JGBs. Long story short, as this process was highly political and a sensitive subject, they decided to radically lower the target allocation weight for JGBs to 35% in 2014, presented it as the result of a philosophical change in the way GPIF is managed and how the concept of “risk” should be considered. Investment in JGBs was no longer considered low risk in real terms. The asset allocation for domestic bonds was further lowered to 25% in 2020. The following is what MITANI Takahiro [三谷隆博], the GPIF CEO at the time and an ex-BoJ senior official, said in the October 2014 GPIF minutes.

“Yields are just under 0.5% now, so a move to near 3% would mean a loss of about ¥25 trillion. (…). So I think the clearest way to explain it is that reducing the weight on JGBs to some degree is simply unavoidable [unofficial translation]”

The 2014 cut in the weight was partly an emergency escape

As I wrote earlier, the radical asset reallocation in 2014 was part a shift in the concept of risk from “nominal” to “real”, so that JGB is no longer risk free assets. But the change was also at least partly an emergency measure to escape the abnormally low-yield environment. Then the next natural question is, now that the JGB yields are no longer abnormally low, what should happen to its asset allocation? Pensions are paid in yen, so long-duration Japanese government bonds are a natural match, while GPIF should also be holding some non-yen assets and equities to diversify its assets and protect the overall balance sheet from inflation. In the next section, I will show you a simplified replication of how GPIF decides its asset allocation and what GPIF’s asset allocation could be now that JGB yields are normal.

How GPIF decides its weights

Put simply, GPIF’s target weights are the output of an optimizer with a few rules. Find the portfolio that, at the required real return, has the smallest average shortfall below wage growth in the years when it falls short, and round it to the nearest 5%.

When GPIF last decided to keep the current 25% weight for domestic bonds in 2025, JGBs were assumed to produce a nominal return of 0.5% against wage growth of 1.3%, so a real return of minus 0.8%. Exhibit 1 shows a simplified matrix of weights depending on expected nominal return on bonds and wage growth. The red box shows the assumption behind the 2025 weights decision mentioned above. If we use a higher wage growth assumption of 2.3%, an expected nominal return of 1.8% on bonds gives a weight of 35%. GPIF’s bond portfolio has an average maturity around 10 years, and the 10-year bond is yielding 3% now. A lot of thought and estimation is needed to form a view on the expected real return on domestic bonds, but in my view, it is clear that the minus 0.8% used in their last review is too low given where bond yields are.

Why GPIF kept the weight in 2025 and why circumstances changed

In late 2024 when the GPIF was reviewing the weight as part of its five-year plan, the BoJ was already in the process of exiting from QE and raising its policy rate. However, the JGB market was still in the process of adjustment and bond yields had a lot of room to rise. For example, the 10-year yield was 0.89% at the end of September 2024, rose to 2% by the end of 2025 and now, in September 2026, stands at 3%. You can understand why GPIF decided to keep its weight on domestic bonds unchanged as it would have incurred capital losses on bond purchases in 2025. But in my view, as I wrote in the report “The Long Climb in JGB Yields Is Nearly Over” [archived PDF], long bond yields are getting closer to a stability point. If the GPIF board shares my view, it is a good time to think about raising its target weight into domestic yen bonds.

The Whale Problem and the Washington Problem

How high should the new weight be for domestic bonds? The reality of determining appropriate weights and how to announce it is a lot harder than the simplified model I explained above. Other than forming a reasonable view on the expected real return on asset classes, there are a few factors that complicate the process.

Firstly, GPIF needs to think about how such an announcement would affect the market. GPIF is what financial market professionals call a whale, a massive investor whose investment decisions sway market prices. There is also a related argument that given the dominance of GPIF in the domestic market, GPIF should be increasing its asset weight abroad to reduce its impact on domestic asset markets.

Secondly, changing asset allocation weights carries political considerations. If GPIF decides to raise the target weight for domestic bonds, foreign bonds are the likely asset class whose weight will go down. More than 50% of its foreign bonds are in US dollars. With all the news circulating in the market now, Scott Bessent will not like a public announcement that one of the largest pension funds in the world is reducing its purchase of US treasuries. There are domestic political considerations as well, as the Takaichi government contemplates how best to fund its deficits.

These are the issues GPIF officials must be debating. How GPIF decides its asset allocation in the near future will be a revealing case study for those who want to study how policy-making works in Japan. Those who are interested in this topic should read the transcripts of an interesting government committee in 2014 that focused on how GPIF could shield itself from political meddling. Guess who chaired the committee? UEDA Kazuo [植田和男].

Whatever the near-term decision GPIF makes regarding its target weight, I think it is fairly clear that GPIF should be increasing its investment into domestic bonds. The following table shows how much GPIF could buy in net terms, depending on the eventual rise in the target weight.

How much GPIF buys: ¥32tn at 35%, ¥80tn at 50%

Domestic Bond Target	GPIF Buys	With the Sister Funds
30%	¥16tn	¥20tn
35%	¥32tn	¥20tn
40%	¥48tn	¥20tn
50%	¥80tn	¥20tn

Additional domestic-bond holdings from re-weighting the fund at 30 June 2026 (managed assets ·317.8tn). Foreign bonds sold first.
Source: GPIF, JMA.

Three things in this table matter for the market. GPIF is allowed to deviate its asset allocation by six points either side of 25% without any announcement, so 39% target is already possible without any public announcement. In 2014 GPIF moved inside its band first and announced the new portfolio afterwards, and I would expect the same sequence this time. Second, these are static figures, which do not account for the growth of the fund over time.

The sister funds move with the whale

As mentioned earlier, GPIF has a few siblings. The Pension Fund Association for Local Government Officials (¥35.5tn), the Federation of National Public Service Personnel Mutual Aid Associations, known as KKR (¥11.5tn), and the Promotion and Mutual Aid Corporation for Private Schools of Japan (¥4.9tn) manage the pension reserves of local government employees, national government employees and private-school teachers. These sisters run their funds on the same 25/25/25/25 model, and with the legacy reserves they also run, they hold a further ¥87tn on top of GPIF’s.

Conclusion

GPIF cut its domestic bond weight from 60% to 35% in 2014, and later to 25%, to safeguard its assets from the manipulated low JGB yields at the time and the eventual crash they foresaw. That crash, as GPIF’s CEO MITANI defined it in 2014, has now happened with the 10-year yield rising to 3%. In my view, JGB yields have largely normalized and there is no emergency reason to avoid domestic bonds. It is only natural that GPIF would raise its allocation into domestic bonds, although how GPIF communicates this publicly is a touchy issue they need to figure out. When GPIF raises its domestic bond allocation, foreign bonds are the likely asset class to take the hit. GPIF publishes quarterly results and the next publication for the end-September 2026 quarter, expected in early November 2026, will be closely watched. Judging from market movements in the last few weeks, the market has started to sense that what I described in this article is already happening and Japanese money is starting to come back to the yen. While it should be characterized as rebalancing, rather than a repatriation, it seems we are observing a big turn in Japanese cross-border capital flows.

Rail Congestion Edges Up in Japan, but Far from Pre-Pandemic Levels

[from Nippon.com, August 24, 2026]

Rail congestion rose again in Japan [日本]’s major cities in fiscal 2025, but trains are still far less packed than they were before the pandemic.

Slight Rise in Tokyo

A report from the Ministry of Land, Infrastructure, Transport and Tourism [国土交通省] showed that the rail congestion rate in the Tokyo [東京都] metropolitan area rose slightly in fiscal 2025, but still remains low compared with before the pandemic.

The average rate of congestion during peak morning hours for the Tokyo [東京都], Osaka [大阪市], and Nagoya [名古屋市] metropolitan areas was 143% (up 4 points year on year), 117% (up 1 point), and 126% (no change), respectively. After plunging in fiscal 2020 due to the pandemic, and remaining flat the following year, congestion rates have been rising since fiscal 2022.

The graph below shows the changes in rate of congestion and train capacity for 31 major train lines in the Tokyo metropolitan area. Before the pandemic, the rate was above 160%, but now it is around 20 points lower.

A congestion rate of 143%, or 43% more than the standard capacity, is characterized by a situation where passengers are able to either sit down, hold on to a strap, or hold on to a bar near the train door, but there is almost no direct physical contact with other riders.

On the most crowded lines, congestion rates in the Tokyo metropolitan area prior to the pandemic were close to 200%, a level at which there is considerable body contact and people near the doors are unable to move. However, the congestion rates for such lines in fiscal 2025 were much lower.

Data Sources

Data on train congestion in fiscal 2025 (Japanese) from the Ministry of Land, Infrastructure, Transport and Tourism [国土交通省].

(Translated from Japanese.)

Japan-Watching: Economics in the Age of AI

A Thought Experiment Envisioning A “Fully Automated Society”

from REITI, by IKEUCHI Kenta [池内健太], Senior Fellow (Policy Economist)

In a world where human labor has become unnecessary because of AI, what should be the focus of the study of economics? In the future, if AI and robots have become capable of producing all goods and services necessary for our society, what kind of economic problems could remain?

Of course, a fully automated society is not predicted for the near future. This article imagines such an extreme type of society as a thought experiment designed to consider economic systems in the age of AI. Here, a fully automated society refers not only to one in which corporate production is automated, but also to one in which the legislative, administrative, and judicial functions of government are substantially supported—and in some cases automated—by AI.

I started thinking about this matter when I heard from a researcher acquaintance that a paper concerning AI’s impact on employment had caused quite a stir on X, and I decided to read it out of curiosity. The paper discussed the possibility that AI-driven job cuts could reduce workers’ incomes, weaken consumer demand, and ultimately backfire on firms themselves (Falk and Tsoukalas 2026). Companies may earn higher profits in the short term by taking advantage of AI to cut back on personnel costs. However, if most companies follow that same approach, overall market demand would weaken because workers are also consumers.

The purpose of this article is not to question the validity of that paper’s argument. Rather, the focus is on what economic problems would remain in a future society if AI not only partially replaces human labor but also produces most goods and services.

Scarcity Will Continue to Be a Problem

There has already been extensive research regarding the impact of AI on employment. For example, Acemoğlu and Restrepo (2019) argued that while automation may replace existing human jobs, it may also create new ones. Moreover, the possibility that technological advances could free humans from labor and greatly alleviate economic problems was discussed long ago by Keynes (1930).

If AI and robots become capable of producing goods and services on a sufficiently large scale, would economic problems disappear? That would not necessarily be the case. Even in a fully automated society, scarce resources such as land, location, natural environments, energy, and rare metals will remain limited. Moreover, social status, influence, and political decision-making power are deeply connected to human intentions and perception, and cannot simply be delegated to AI. More land will not become available simply because more people wish to live in convenient urban locations. Quiet natural environments, advanced healthcare resources, social attention, and political influence also cannot be maximized for everyone at the same time.

Therefore, even in a fully automated society, some economic problems will remain. However, the main focus will shift from the “problem of insufficient ordinary commodities” to “how to allocate fundamentally scarce resources.” As production capacity increases, the value of true scarcity only becomes clearer.

In that case, the roles of markets and prices will still exist. Prices are not merely figures that allow for corporate earnings; they convey information about which resources are scarce and to what extent, how much demand there is for those resources, and what supply constraints there are. That perspective connects to a classic argument made by Hayek (1945), who argued that prices function as a mechanism through which dispersed information can be aggregated.

However, if AI becomes deeply integrated into the market, the concept of price itself may change. At present, prices serve as one-dimensional signals representing the levels of various factors, such as scarcity, quality, demand, supply, environmental impact, and future risks, expressed in terms of a single metric, that is, monetary value. If AI agents become capable of processing large volumes of information on behalf of consumers and companies, it is possible that multi-dimensional market signals that convey information concerning all those various factors, including quality, environmental impact, congestion, delivery time, reliability and social impact may come into use. Narita (2025) also discussed the possibility that the roles of money and prices may change, with more diverse evaluation standards becoming involved in economic coordination.

For People to Enjoy Affluence

In a fully automated society, how people participate in the market and society will become more important than ever. If the premise that people earn income through labor becomes obsolete, it will be necessary to develop a mechanism whereby purchasing power is distributed to everyone. In this context, universal basic income (UBI) may be reframed not only as relief for the unemployed, but as a form of fundamental purchasing power used by people to express their preferences. Managi [馬奈木俊介] (2025) also pointed out that governance over the equitable distribution of the benefits of AI is essential.

Moreover, UBI may not be limited to simple monetary payments. In the future, UBI may take the form of a system combining other benefits as well, including energy use quotas, rights of access to basic healthcare services and education, and rights to refuse or control the use of personal data. In a fully automated society, UBI would therefore be a matter not only of how much to provide, but also of what kinds of access to guarantee and over what time horizon.

Another important issue is whether it is appropriate to treat people merely as consumers. In a fully automated society, the need for people to work for a living may diminish. However, even without such a necessity, humans will likely still possess the desire to create or to be creative. It is human nature to try new things and to try to surprise or impress other people. The spirit of fun and curiosity, a desire for self-expression, an inquisitive mind, and an appetite for challenges are deeply and fundamentally connected to human nature. Therefore, when designing a future UBI system, it will be important to treat people not merely as consumers but as agents who can participate in creation and exploration.

Additionally, the question of who owns and controls AI systems, robots, foundation models, and computing infrastructure is also a major issue. Even if a certain level of income is distributed to everyone, there may remain a power gap between those who control AI systems and robots and those who merely have access to them, in place of the income gap that currently exists in society.

All of the above-mentioned points for debate are relevant to the study of economics. How scarce resources should be allocated, how to guarantee people’s range of choices, and how to design ownership and controlling rights are problems central to economics. A fully automated society is not a near-future prediction. However, this extreme thought experiment serves as a useful guide for considering economic systems in the age of AI. Economics in the age of AI is not about discarding the intellectual legacy of economics, but about inheriting it and extending it toward a new society.

References

Acemoğlu, D. and Restrepo, P. (2019) “Automation and New Tasks” [archived PDF], Journal of Economic Perspectives, 33(2), 3–30.
Falk, B. H. and Tsoukalas, G. (2026) “The AI Layoff Trap” [archived PDF], arXiv preprint, arXiv:2603.20617.
Hayek, F. A. (1945) “The Use of Knowledge in Society” [archived PDF], American Economic Review, 35(4), 519–530.
Keynes, J. M. (1930) “Economic Possibilities for our Grandchildren” in Essays in Persuasion.
Narita, Y. [成田悠輔] (2025) Nijyu-ni Seiki no Shihon Shugi: Yagate Okane wa Zetsumetus Suru [22世紀の資本主義：やがてお金は絶滅する] (Capitalism of the 22nd Century), Bunshun Shinsho [文春新書].
Managi, S. [馬奈木俊介] (2025) “The Future of Social Science of AI,” RIETI Column.

June 12, 2026

Economics-Watching: Bank of Japan Updates (June 25th)

[from the Bank of Japan (日本銀行), June 25, 2026]

Economic Activity, Prices, and Monetary Policy in Japan

Speech at a Meeting with Local Leaders in Hyogo

TAMURA Naoki [田村直樹], Member of the Policy Board, June 25, 2026

Read the full translated speech [Archived PDF]

Flow of Funds Accounts (Retroactive Revision and 1st Quarter 2026, Preliminary Figures)

The Bank released the following data today.

Flow of Funds Accounts (1st Quarter 2026, Preliminary Figures) [Archived PDF]
Basic Figures of the Flow of Funds (1st Quarter 2026) [Archived PDF]

The Overview of Japan, US, and the Euro area is renewed once a year after the Flow of Funds Accounts is released in June.

The Bank of Japan retroactively revises data for the Flow of Funds Accounts (FFA), in principle once a year, to reflect information updates, such as newly obtained source data and institutional changes, and to incorporate revised estimation methods. The retroactive revision of 2026 was implemented on June 25 and data from the first quarter of 2005 onward has been updated accordingly. The majority of the revision contents are unchanged from the Planned Retroactive Revision to the Flow of Funds Accounts [Archived PDF] released on May 25, 2026.

To download the retroactively revised data, please use the BOJ Time-Series Data Search.

Monthly Report on the Services Producer Price Index

Read the full May report [Archived PDF]

Updates to the Bank of Japan’s statistical data are available at BOJ Time-Series Data Search.

Japan-Watching: Ministry of Finance, Japan

Preliminary determination of Anti-Dumping Duty Investigation of Nickel-added cold-rolled stainless steel coil, sheet, and strip originating in the People’s Republic of China and the Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu

Upon receipt of an application from NIPPON STEEL CORPORATION [日本製鉄株式会社], Nippon Yakin Kogyo Co., Ltd. [日本冶金工業株式会社], NAS Stainless Steel Strip MFG. Co., Ltd. [ナス鋼帯株式会社の画像] and NIPPON KINZOKU CO., LTD. [日本金属株式会社] on May 12, 2025, the Ministry of Finance (MOF) [財務省] and the Ministry of Economy, Trade and Industry (METI) [経済産業省] began conducting an investigation since July 22, 2025, to determine whether or not to impose an anti-dumping duty on Nickel-added cold-rolled stainless-steel coil, sheet, and strip^a originating in the People’s Republic of China^b and the Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu.
1. Note: An alloy steel containing 10.5% or more of chromium and containing by weight more than 0.6% nickel. The characteristics of this product are that it combines corrosion resistance, the functionality of steel, and a beautiful and clean design by manufacturing methods. Also, it is used in various fields of demand.
2. Note: Excluding the regions of Hong Kong and Macau.
MOF and METI have explored objective evidence collected from interested parties, including suppliers in the People’s Republic of China and the Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu, providing opportunities for them to present evidence and to express their views. As a result, MOF and METI today made a preliminary determination in the anti-dumping investigation of the product, presuming the fact of the importation of the dumped product and the fact of the material injury to the domestic industry caused by such importation. (Public Notice on June 19, 2026)

MOF and METI will continue the investigation in accordance with the provisions of the international rules under the WTO Agreements and related domestic laws and regulations, providing the interested parties with an appropriate opportunity to present evidence and express their views relating to the preliminary determination.

Following the further investigation, the Government of Japan will determine whether or not the product has been imported into Japan at dumped prices and if such dumped imports have caused material injury to the domestic industry, and make a decision whether or not to impose a definitive anti-dumping duty on the product.

The interim report on preliminary determination offers details of the investigation.

Reference

Public Notice on June 19, 2026 [Archived PDF]

Interim report on preliminary determination [Archived PDF]

[Provisional Translation, June 19, 2026, Ministry of Finance, Ministry of Economy, Trade and Industry]

Extension of the Period of Investigation of Nickel-added cold-rolled stainless steel coil, sheet and strip originating in the People’s Republic of China and the Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu

With regard to the Anti-Dumping Duty Investigation on Nickel-added cold-rolled stainless-steel coil, sheet, and strip^a originating in the People’s Republic of China^b and the Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu, the Ministry of Finance (MOF) [財務省] and the Ministry of Economy, Trade and Industry (METI) [経済産業省] have decided to extend the period of investigation by three months until September 21, 2026. The purpose of this extension is to carefully review the evidence and relevant documents submitted by interested parties, while ensuring full transparency and fairness throughout the investigation process.
1. Note: An alloy steel containing 10.5% or more of chromium and containing by weight more than 0.6% nickel. The characteristics of this product are that it combines corrosion resistance, the functionality of steel, and a beautiful and clean design by manufacturing methods. Also, it is used in various fields of demand.
2. Note: Excluding the regions of Hong Kong, China, and Macau, China.
MOF and METI have been conducting the investigation since July 22, 2025. The investigation was to be concluded within one year, but the period can be extended by six months at most if it is found necessary for special reasons.

Reference

Notice of the Ministry of Finance Relating to the Extension of the Period of Investigation (No. 178, June 19, 2026) [Archived PDF]

[Provisional Translation, June 19, 2026, Ministry of Finance, Ministry of Economy, Trade and Industry]

Issues Re-opened through Liquidity Enhancement Auction on June 19, 2026

Securities	Issue Numbers	Re-opened Amounts (billion yen face value)
10-Year	363	133.7
10-Year	364	8.4
10-Year	365	34.8
10-Year	369	27.7
10-Year	370	48.9
20-Year	128	75.1
20-Year	129	110.6
20-Year	132	9.0
20-Year	133	2.5
20-Year	136	4.9
20-Year	142	16.0
20-Year	143	6.8
20-Year	153	2.0
20-Year	154	9.9
20-Year	159	0.7
30-Year	6	5.0
30-Year	7	0.1
30-Year	13	5.0
30-Year	14	0.1
30-Year	15	14.1
30-Year	16	0.2
30-Year	17	25.6
30-Year	19	4.9
30-Year	20	53.0
30-Year	23	8.6
30-Year	24	32.4
30-Year	26	8.9

Result of Liquidity Enhancement Auction on June 19, 2026 (For JGB Market Special Participants)

Auction Date	Issue Date	Amounts of Competitive Bids (billion yen)	Amounts of Bids Accepted (billion yen)	Highest Accepted Spread^*	Allotment for Bids at the Highest Accepted Spread	Average Accepted Spread^*
6/19	6/22	1,897.8	648.9	+0.020%	98.6666%	+0.016%

Note

These columns indicate the spreads from the reference rate.

Auction Result of Treasury Discount Bills on June 19, 2026

Issue Number	Auction Date	Issue Date	Maturity Date	Amounts of Compet. Bids (billion yen)	Amounts of Bids Accepted (billion yen)	Lowest Accepted Price (per 100 yen)	Yield at the Lowest Accepted Price	Allotment for Bids at the Lowest Accepted Price	Weighted Average Price (per 100 yen)	Yield at the Average Price	Amounts of Non-price compet. Auction Ⅰ^* (billion yen)
1389	6/19	6/22	9/24	9,637.50	3,150.38	99.7630	0.9224%	79.2411%	99.7660	0.9107%	949.60

Note

For JGB Market Special Participants.

Interest Rate (June 2026)

Date	1Y	2Y	3Y	4Y	5Y	6Y	7Y	8Y	9Y	10Y	15Y	20Y	25Y	30Y	40Y
6/1	1.123%	1.4%	1.558%	1.775%	1.948%	2.094%	2.243%	2.397%	2.538%	2.682%	3.225%	3.567%	3.871%	3.863%	3.8%
6/2	1.114%	1.38%	1.522%	1.722%	1.889%	2.019%	2.157%	2.31%	2.447%	2.577%	3.141%	3.493%	3.801%	3.81%	3.742%
6/3	1.126%	1.401%	1.56%	1.767%	1.943%	2.077%	2.219%	2.373%	2.508%	2.645%	3.183%	3.521%	3.817%	3.817%	3.748%
6/4	1.148%	1.417%	1.579%	1.787%	1.966%	2.105%	2.242%	2.395%	2.535%	2.671%	3.225%	3.554%	3.835%	3.833%	3.749%
6/5	1.14%	1.412%	1.574%	1.778%	1.955%	2.096%	2.233%	2.391%	2.532%	2.669%	3.222%	3.551%	3.838%	3.841%	3.753%
6/8	1.144%	1.42%	1.588%	1.793%	1.978%	2.128%	2.274%	2.432%	2.575%	2.715%	3.269%	3.604%	3.878%	3.876%	3.789%
6/9	1.146%	1.42%	1.582%	1.784%	1.962%	2.101%	2.242%	2.398%	2.537%	2.669%	3.217%	3.543%	3.824%	3.823%	3.759%
6/10%	1.147%	1.426%	1.594%	1.796%	1.971%	2.112%	2.257%	2.412%	2.549%	2.681%	3.218%	3.538%	3.806%	3.811%	3.739%
6/11	1.149%	1.427%	1.592%	1.792%	1.963%	2.108%	2.258%	2.411%	2.551%	2.682%	3.23%	3.554%	3.821%	3.823%	3.774%
6/12	1.15%	1.417%	1.579%	1.772%	1.938%	2.077%	2.218%	2.373%	2.511%	2.643%	3.189%	3.508%	3.77%	3.767%	3.713%
6/15	1.141%	1.409%	1.556%	1.743%	1.901%	2.039%	2.175%	2.322%	2.46%	2.589%	3.143%	3.461%	3.73%	3.725%	3.674%
6/16	1.147%	1.414%	1.585%	1.783%	1.945%	2.084%	2.227%	2.382%	2.522%	2.655%	3.206%	3.52%	3.763%	3.747%	3.692%
6/17	1.139%	1.398%	1.552%	1.745%	1.897%	2.034%	2.182%	2.335%	2.479%	2.613%	3.17%	3.49%	3.741%	3.709%	3.654%
6/18	1.146%	1.4%	1.553%	1.746%	1.898%	2.045%	2.193%	2.353%	2.497%	2.628%	3.19%	3.512%	3.765%	3.737%	3.68%

Treasury Discount Bills to Be Auctioned on June 26, 2026

1. Auction Date:	June 26, 2026
2. Issue Date:	June 29, 2026
3. Maturity Date:	September 28, 2026
4. Offering Amount:	About 4,100 billion yen
5. Others:	The above offering amount may be changed. In such a case, the revised amount will be announced on the day before the auction date.

[Provisional Translation, June 19, 2026, Ministry of Finance]

Stablecoins and Financial Stability

The United States has introduced a new stablecoin regulatory framework, but concerns over the cryptocurrency’s place in the global economy remain.

[from the Federal Reserve Bank of Richmond’s Econ Focus, Fourth Quarter 2025, by Matthew Wells]

Signed into law in July 2025, the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act was a huge step forward for the cryptocurrency industry. The bipartisan legislation marked the federal government’s first effort at creating a regulatory framework for cryptocurrencies and signaled that crypto had finally achieved a status and size worthy of the government’s attention.

Stablecoins are digital assets used primarily as currency to buy and sell other cryptocurrencies, such as bitcoin, on blockchains, which are decentralized electronic ledgers. Traditionally, they are viewed as “private money” that has been pegged one-to-one to a state-issued currency, typically the U.S. dollar, although others have been pegged to the euro, the Japanese yen, and the Swiss franc.

While few people use stablecoins to pay for conventional goods and services, the technology is expanding rapidly. The SWIFT payment system is transitioning to the blockchain, allowing banks to settle transactions with stablecoins, and large companies such as PayPal have developed their own stablecoins. Walmart, Amazon, and several large financial institutions are also exploring their potential.

The GENIUS Act gives banking regulators, including the Federal Reserve, oversight authority over the entities that issue stablecoins. However, the law leaves it to those regulators to decide what rules to create and how to implement them. Further, increases in stablecoin demand may impact other sectors of the economy, such as the Treasury market and the global demand for dollars. All these carry potential implications for the stability of stablecoins, as well as the Fed’s efforts to maintain a safe and secure financial system.

Stablecoin Fundamentals

Customers wanting stablecoins pay money through their bank accounts, credit or debit cards, or other payment systems to an entity issuing them. With those stablecoins in hand, users can make purchases or investments wherever they are accepted. When users want to “cash in,” they take whatever stablecoins they have, which could have increased or decreased in number, back to an issuer, where they collect dollars back at a one-to-one rate.

Two of the most popular stablecoins in the crypto space are Tether and USD Coin. Unlike dollars, which are fiat currency (that is, their value is derived from the government’s declaration of their value), they and other stablecoins are backed or collateralized by a range of assets (or reserves), especially cash or U.S. Treasurys. In theory, these reserves can be easily liquidated to pay any customer seeking to redeem stablecoins for dollars.

The GENIUS Act addresses these dollar-pegged and reserve–collateralized stablecoins specifically, but there are other types of stablecoins that fall outside of the act’s definition. Crypto–collateralized stablecoins, for example, are still pegged to a currency but are backed by other digital assets such as Ethereum, making them less stable because of the greater volatility of their reserves. Another example includes algorithmic stablecoins, which attempt to maintain a consistent dollar-pegged value through automated adjustments in value relative to other digital currencies.

Stablecoins are used primarily as an immediate and secure medium of exchange for blockchain-based transactions, particularly the buying and selling of other cryptocurrencies. Unlike traditional payment systems, which can take days to fully settle transactions, stablecoin transactions are settled at any time of day on the blockchain almost instantaneously through “smart contracts,” where the terms of the transaction are written into the code.

Beyond their speed on the blockchain, another benefit of stablecoins is their global reach. They can be used anywhere in the world, including areas where dollars are difficult to acquire. Coupled with the ease with which a user can move stablecoins in and out of crypto markets, their use can reduce the costs and frictions associated with remittances or other international transactions. For individuals in developing countries with persistently high inflation, stablecoins may also be a way to save money that is insulated from swings in the domestic currency.

In a February 2025 speech [archived PDF], Fed Gov. Christopher Waller similarly noted that for some users, stablecoins might also serve as a store of value. Relative to the other, more volatile crypto assets, stablecoins are low risk, “which allows traders to move out of risky positions into safe ones where the safe asset price is known and stable,” he argued. Most stablecoin transactions — more than 80 percent — occur outside of the United States.

To date, these benefits of speed and availability have mostly been enjoyed by individuals active in the cryptocurrency marketplace rather than the average consumer. According to the Fed’s most recent Diary of Consumer Payment Choice [archived PDF], only 3 percent of respondents said they used cryptocurrency as a form of payment in the last month. However, the annual transaction value of stablecoins exceeded $27 trillion in 2024, surpassing that of Visa and Mastercard combined. Further, stablecoins’ current market capitalization is about $267 billion, and Citigroup projects it will grow to between $1.9 trillion and $4 trillion by 2030. Treasury Secretary Scott Bessent made a similar claim in November, suggesting it could reach $3 trillion in the coming years. Motivated by that growth, and its potential implications for the economy, Congress passed the GENIUS Act.

A New Regulatory Framework

The GENIUS Act grants banks, nonbanks, and even nonfinancial institutions with approval from state or federal regulators the ability to issue stablecoins to the public. Under the act, the Office of the Comptroller of the Currency regulates federally qualified issuers with over $10 billion in stablecoins in circulation. If the issuer is a subsidiary of an insured depository institution, such as a bank, it is regulated by the appropriate federal banking agency. All issuers with less than $10 billion in circulation would be regulated at the state level. Regulators would be responsible for conducting annual audit and ensuring compliance with existing anti-money laundering and sanctions requirements.

Crucially, issuers would be required to hold at least one dollar’s worth of reserves for every stablecoin issued. Those reserves mostly come in the form of cash, insured and uninsured deposits, short-term Treasurys, repo agreements, and central bank reserve deposits. However, these issuers would be exempt from the regulatory capital requirements that currently apply to banks, and this holds true even if the issuers are banks engaged in regular banking activities.

Stablecoins are not defined as securities or commodities under the legislation, meaning they are not federally insured and do not have the same protections as traditional bank deposits. In other words, there is no government-backed guarantee a user would be able to get cash back when they want to trade back in their stablecoins. Issuers, as of now, also do not have access to the Fed’s lending facilities.

Proponents of stablecoins argue that government insurance and access to the Fed are not necessary because the assets designated as collateral by the GENIUS Act are highly liquid, and issuers are required to hold as many dollars in reserve as they have stablecoins in circulation. While this would seemingly guarantee stablecoin holders could redeem their coins for cash whenever they choose without any difficulty, not all policymakers or observers agree it would be that easy.

In an October 2025 speech [archived PDF], Fed Gov. Michael Barr argued that “Because stablecoins are not backed by deposit insurance and stablecoin issuers do not have access to central bank liquidity, the quality and liquidity of their reserve assets is critical to their long-run viability.”

He identified several points of vulnerability in those assets. In addition to the potential for some consumers to mistakenly assume all stablecoins — not just those covered by the GENIUS Act — carry the same level of stability, he pointed out that other dollar-pegged assets have not always been able to maintain that one-to-one value. Money market mutual funds, which are listed as one class of asset that can be used as collateral, “broke the buck” in 2008 following Lehman Brothers’ bankruptcy and experienced strains again in March 2020 at the outbreak of the COVID-19 pandemic.

Uninsured deposits, another acceptable reserve asset, were also a risk factor that precipitated the March 2023 banking stress associated with the failure of Silicon Valley Bank and others. The legislation also allows for any medium of exchange authorized by a foreign government to be used as collateral via repo agreements, which until recently in the case of El Salvador included the highly volatile bitcoin.

In an October 2025 speech, Fed Gov. Michael Barr argued that “Because stablecoins are not backed by deposit insurance and stablecoin issuers do not have access to central bank liquidity, the quality and liquidity of their reserve assets is critical to their long-run viability.”

The GENIUS Act prohibits issuers from paying out interest to individuals holding their stablecoins. If stablecoins paid interest, they would have to be treated — and regulated — like securities rather than simply forms of payment. The legislation does, however, allow stablecoin exchanges, known as Virtual Asset Service Providers, to offer “rewards” to users who choose to buy and sell cryptocurrencies or conduct other transactions on their platforms. This creates a potential loophole, as these exchanges, if authorized by regulators, can also be part of the same entity issuing a stablecoin. The platform/issuer can then use the dollars traded for the stablecoins to purchase other assets, likely Treasurys to back the stablecoins, and then pay out rewards to customers with the proceeds from those investments.

Barr noted this area of concern, suggesting issuers “have a high incentive to maximize the return on their reserve assets by extending the risk spectrum as far out as possible. Stretching the boundaries of permissible reserve assets can increase profits in good times but risks a crack in confidence during inevitable bouts of market stress.” To hedge against this possibility, stablecoin issuers are required to publish monthly reports on the composition of their reserve assets, a move intended to give stablecoin holders increased confidence in the issuer’s liquidity.

Parallels to the Free Banking Era

Barr’s argument implies that stablecoins are only as stable as the assets backing them. The United States first established a banking system with a national currency backed by Treasury bonds during the Civil War. Prior to that, in the free banking era from 1836 to 1863, states conducted banking supervision and regulation, and banks issued their own currencies. (See “When Banking Was ‘Free,’” [archived PDF] Econ Focus, First Quarter 2018.) Those paper notes had to be collateralized through state and federal government bonds, and capital and reserve requirements were inconsistent across states.

This meant the country’s economy operated with competing, private currencies. It was difficult for currencies in one part of the country to be redeemed in other parts, and it was often done at a discount; for example, the farther away from the bank issuing the note, the steeper the redemption discount. It wasn’t unusual for citizens to question the collateral backing the various banks’ notes, leading to regular bank runs and failures.

One can draw parallels between the free banking period and today’s stablecoin landscape. First, as of early June, there were 233 stablecoins available on the crypto market. Numerous digital service platforms market themselves as spaces where private companies can create, manage, and distribute their own stablecoins. Bank of America, JPMorgan Chase, Citigroup, and Wells Fargo are considering the idea of a jointly issued stablecoin, as well as their own individual ones.

As was the problem with free banking, some economists question whether consumers will always maintain confidence that they can redeem stablecoins for cash on demand at the promised one-to-one rate. The large banks may be able to issue coins that no one will doubt, but the stablecoin marketplace includes platforms and issuers that are not banks at all, as well as international operators outside the jurisdiction of U.S. financial regulators.

“Smaller companies planning to issue stablecoins under the GENIUS Act to be regulated by one of the states may face market resistance,” says Michael Bordo, an economist at Rutgers University. “Unless there is perfect information about the backing and complete confidence in it, holders may want to discount the stablecoins or avoid them completely, as was the case under free banking in the United States.”

Yale University economist Gary Gorton expresses similar concerns, particularly due to the difficulty in regulating a transnational market. “Let’s suppose that one of the exchanges out there collapses because of fraud. Now everybody’s a little suspicious of these exchanges, and many aren’t even based in the United States,” he says. “That’s the kind of thing that would cause everybody to run.”

Should one stablecoin issuer experience a run where customers doubt its ability to pay back dollars on demand, it is possible others would too, especially if they are all backed by similar assets. This could lead to a crisis that extends beyond the stablecoin space and impacts the wider financial system. In a recent paper co-authored with Jeffery Zhang of the University of Michigan Law School, Gorton argued this outcome is consistent with the nature of short-term debt. Stablecoins are a form of that debt, and because of the laws of supply and demand, their values should fluctuate as the values of the assets backing them fluctuate.

“If one issuer gets in trouble and its stablecoin holders all run on it and ask for cash, it can sell Treasurys and give them the cash,” says Gorton. “But in a systemic event, 500 issuers are under siege and they all sell their Treasurys, and the price of Treasurys goes way down.”

Gorton and Zhang argued such a failure is in keeping with the pattern of systemic crises over the past 200 years, and the solution is not to outlaw stablecoins but to provide a safer alternative where “no one should have an incentive to produce information about the backing for the money (i.e., the banks’ assets); and everyone should know that no one has an incentive to produce that information.” In other words, a stablecoin that is truly stable is one that is accepted at par, anywhere and at any time, no questions asked. Gorton says that a digital currency issued by a central bank would meet these criteria.

Should one stablecoin issuer experience a run where customers doubt its ability to pay back dollars on demand, it is possible others would too, especially if they are all backed by similar assets. This could lead to a crisis that extends beyond the stablecoin space and impacts the wider financial system.

The Road Ahead

Skeptics and supporters alike agree that stablecoin adoption is likely to increase in the coming years. An important question, however, is whether it will attract new users looking for a new form of payment. Certainly, stablecoins offer the advantage of instant transactions, and merchants might have incentive to adopt them to replace credit cards, which currently assess transaction fees between 1.5 percent and 3.5 percent for each purchase. (See “Should Credit Card Fees Be Regulated?” [archived PDF]) However, it may be possible to achieve the benefits of quicker settlements and lower fees with existing payment rails, such as FedNow, raising the possibility that internal U.S. demand may be limited.

In a recent speech [archived PDF], Fed Gov. Stephen Miran acknowledged that stablecoins’ future growth may lie outside the United States. “Because GENIUS Act payment stablecoins do not offer yield and are not backed by federal deposit insurance, I see little prospect of funds broadly fleeing the domestic banking system,” he said. “The real opportunity in stablecoins is to satiate untapped foreign appetite for dollar assets from savers in jurisdictions where dollar access is limited.”

This increased global demand for stablecoins could precipitate increased demand for U.S. Treasurys. Stefan Jacewitz, an economist at the Kansas City Fed, suggested in a recent report that there is still a way to go for any increased adoption of stablecoins to make a meaningful difference in the economy. Circle, the largest U.S.-based stablecoin issuer, currently holds 43 percent of its assets in Treasurys. If all other issuers held that same percentage in Treasurys, it would amount to about $125 billion, which is less than 2 percent of the $6 trillion in outstanding Treasurys.

However, if the projections of increased adoption materialize, Jacewitz acknowledged the possibility that “it could lead to a substantial redistribution of funds” and potentially increase demand for Treasurys such that the increase in stablecoin issuers’ Treasury holdings could outpace the decrease in bank holdings. A 1 percent decrease in bank Treasury holdings — and an accompanying 1 percent decrease in bank lending — translates to a $325 billion reduction in loans into the economy, Jacewitz estimated.

The American Bankers Association and other banking organizations point to this potential for deposits to leave the banking system in calling for regulators to limit the ability of stablecoin issuers and platforms to pay out rewards. The crypto industry disagrees, arguing that banks fear competition, and banks could incentivize their depositors to stay by raising their deposit rate, something they did when they first competed with money market mutual funds.

While there is widespread agreement on the potential for stablecoins to serve an important function for cross-border transactions, concerns about their soundness and stability remain, and they are not just theoretical. Circle held $3.3 billion of its approximately $40 billion in reserves at Silicon Valley Bank when it collapsed in 2023, and its inability to access those reserves triggered a fall in the value of its USD Coin from the one-to-one ratio to below 87 cents on the dollar. In that case, the federal government stepped in and made whole all of Silicon Valley Bank’s depositors, including Circle, which restored its dollar peg.

Bordo argues that in the wake of the free banking era, it still took years of costly bank failures to get to the point where policymakers acted upon the realization that stability in the banking system required much more government intervention, supervision, and regulation than had existed. He notes, “There are always new entities that are going to figure out a way to be outside the regulatory net,” and stablecoins will not be any different.

As with any new financial innovation, the Fed will continue to study stablecoins to ensure that their benefits can be enjoyed by those who want to use them while maintaining overall financial and banking stability.

Readings

Gorton, Gary, and Jeffery Zhang. “Why Financial Crises Recur.” [archived PDF] University of Michigan Law and Economics Research Paper No. 24-069, June 25, 2025.

Jacewitz, Stefan. “Stablecoins Could Increase Treasury Demand, but Only by Reducing Demand for Other Assets.” [archived PDF] Economic Bulletin, Federal Reserve Bank of Kansas City, Aug. 8, 2025.

Spira, Jack, and David Wessel. “What Are Stablecoins, and How Are They Regulated?” [archived PDF] Brookings Commentary, Oct. 24, 2025.

“Stablecoins 2030: Web3 to Wall Street.” [archived PDF] Citi Institute, September 2025.

Download this article [archived PDF].

Related Webinar

PaymentsJournal is offering a webinar entitled “Stablecoins and the Reinvention of Remittance” on Tuesday, May 12, 2026 1:00-2:00 PM EDT.

RSVP for their webinar.

Economics-Watching: Where Could Reshoring Manufacturers Find Workers?

[from the Federal Reserve Bank of Cleveland, 9 October, 2025]

by Stephan D. Whitaker, Senior Policy Economist

The United States has lost millions of manufacturing jobs in recent decades, but a variety of policies have been enacted to incentivize the creation of manufacturing jobs in America. This District Data Brief analyzes where manufacturers might find US workers to fill these roles.

Introduction

The announcement of new tariffs this year has reignited the discussion of whether the United States can expand its manufacturing employment by millions of workers. Reversing decades of manufacturing job losses is one explicit goal of the new higher tariffs. This District Data Brief presents measures of employment and demographics as context around the current and potential employment in US manufacturing. Raising manufacturing employment by 4 to 6 million workers would constitute a large increase relative to current levels. However, an increase of this scale would not be large relative to the global growth of manufacturing employment in recent decades, the current US labor force size, or the number of US adults not engaged in high-paying work.

With different priorities and approaches, policymakers have spent much of the past decade addressing issues related to the loss or absence of manufacturing in the United States. For example, America’s dependence on imported manufactured goods was highlighted at the beginning of the COVID-19 pandemic as supply chain disruptions led to shortages of medical equipment, pharmaceuticals, microchips, and other products. The CHIPS and Science Act and the Inflation Reduction Act featured tax breaks and subsidies to expand US manufacturing capacity for semiconductors, electric vehicles, and renewable energy equipment.

At the same time, economists have been documenting the loss of work opportunities and earning power by workers without college degrees as manufacturing employment has declined. In 2013, David Autor, David Dorn, and Gordon Hanson published a study that estimated the labor market impacts resulting from increased trade competition following China’s entrance into the World Trade Organization, an effect often referred to as the “China shock.” Dozens of studies have since used the regional variation in job and income losses caused by the China shock to measure the adverse impacts of job displacement on family structures, crime, health, and other social indicators. Some supporters of industrial subsidies and higher tariffs have expressed the hope that these dynamics can be put into reverse.

Read the full article [archived PDF].

Economics-Watching: Estimating the Effects of Monetary Policy: An Ongoing Evolution

New monetary policy tools have lengthened the interval over which policy news is transmitted and processed.

[from the Federal Reserve Bank of Kansas City, 2 October 2025]

by Karlye Dilts Stedman, Amaze Lusompa & Phillip An

Disentangling how the economy responds to a monetary policy decision from its response to macroeconomic conditions at the time of the decision is an ongoing challenge. One popular method researchers use to measure the effect of a monetary policy announcement—high-frequency identification—analyzes the reaction of fast-moving financial variables immediately following the policy announcement, using a time window long enough for markets to respond but not so long that the response is contaminated by other information.

Since high-frequency identification was introduced in the early 2000s, policymakers have introduced tools such as forward guidance and large-scale asset purchases. Karlye Dilts Stedman, Amaze Lusompa, and Phillip An examine how the evolution of monetary policy has changed high-frequency identification and assess whether additional changes might be necessary to better capture the effect of modern monetary policy surprises. Although researchers have continually updated the asset mix used in high-frequency identification over time, they have not updated the measurement window. Because the timing of monetary policy communication has changed significantly in recent years, refining the length of this measurement window may be necessary going forward.

Read the full article [archived PDF].

Economics-Watching: Tracking the Economy in Real‑Time Through Regional Business Surveys

[from the Federal Reserve Bank of New York’s The Teller Window, 23 September 2025]

by Richard Deitz and Kartik Athreya

Federal Reserve policymakers need current information about economic conditions to make well-informed monetary policy decisions. But hard data, such as GDP and the unemployment rate, is released with a significant lag, making it difficult to get a precise, real-time read on the economy, especially during times of rapid change.

To help fill the gap, the New York Fed conducts two monthly regional business surveys: the Empire State Manufacturing Survey of manufacturers in New York state and the Business Leaders Survey, which covers service sector firms in New York state, northern New Jersey, and Fairfield County, Conn. These surveys provide timely soft data, available well before hard data is released.

Hard data is based on precise quantitative measurements, such as sales figures or the specific prices firms are charging. By contrast, soft data is qualitative, focusing on trends, expectations, and sentiment around economic activity. And while hard data looks backward, soft data from the regional surveys can look forward—providing important information about expectations for the future and emerging trends.

Gathering soft data quickly can be impactful—for example, the Empire State Manufacturing and Business Leaders surveys signaled a sharp downturn in economic activity in early March 2020 [archived PDF], providing a warning weeks before official statistics captured the full extent of the COVID pandemic’s economic impact.

How the Surveys Work

The New York Fed launched the Empire State Manufacturing Survey in 2001. It was modeled after the Philadelphia Fed’s Business Outlook Survey, a long-running manufacturing survey that has historically been watched by financial markets and policymakers as an early signal about national manufacturing conditions. The Business Leaders Survey was launched later in 2004 and was among the first regional business surveys to target the service sector.

The surveys are sent to over 300 business executives and managers at firms across industries during the first week of every month. While about two-thirds of participating firms have 100 or fewer employees, some have hundreds or thousands of workers.

Leaders at the firms fill out a short questionnaire asking if business activity has increased, decreased, or stayed the same compared to the prior month. The surveys ask about indicators such as prices–yielding insights into inflationary pressures–as well as employment, orders, and capital spending. Respondents answer questions about how they expect these indicators to change over the next six months, offering a forward-looking perspective on the economy’s trajectory.

From the responses, New York Fed researchers construct diffusion indexes by calculating the difference between the percentage of firms reporting increased activity and those reporting decreased activity. Positive values indicate that more firms say activity increased than decreased, suggesting activity expanded over the month. Higher positive values indicate stronger growth, while lower negative values indicate stronger declines.

The surveys include local businesses, like restaurants and car dealerships, as well as firms with national and global reach, such as software manufacturers and shipping enterprises. As a result, the economic indicators derived from the surveys are often early predictors of national economic patterns, frequently aligning with hard data released later.

Getting Answers on Current Issues

The surveys regularly ask supplemental questions about current economic issues to get real-time answers. Over the last few years, the surveys have asked about firms’ experience with tariffs, inflation expectations, if the use of AI is leading to a reduction in employment, how often employees work from home [archived PDF], and whether supply availability was affecting their businesses.

Going Beyond the Indicators

In addition to providing data to track economic conditions, the regional surveys also provide a channel to hear directly from local business leaders. Every month, survey respondents are asked for their comments, offering the opportunity for businesses to share their thoughts, concerns, and experiences with the New York Fed. This helps researchers and policymakers understand how businesses are being affected by economic conditions.

The surveys act as one of the bridges between the New York Fed and the business community, ensuring the voices of regional businesses are considered in economic assessments and policy discussions as well as enhancing the ability of policymakers to make informed decisions to respond effectively to economic challenges.

Executives, owners, or managers of businesses in New York, northern New Jersey, or Fairfield County, Conn., interested in participating in the New York Fed’s monthly business surveys can find more information here. The next survey results will be released on Oct. 15 and 16.

Economics-Watching: SF FedViews: September 4, 2025

[from the Federal Reserve Bank of San Francisco]

Andrew Foerster, senior research advisor at the Federal Reserve Bank of San Francisco, shared views on the current economy and the outlook from the Economic Research Department as of September 4, 2025.

While economic activity in the United States has remained resilient, recent data show some softening in the labor market. Swings in net exports affected GDP in the first half of 2025, with imports surging in the first quarter followed by imports declining in the second quarter. Inflation remains above the Fed’s 2% goal, and a near-term rise from tariffs appears likely. Job gains in recent months have slowed. Downward revisions for recent job growth estimates have been large, but the magnitudes of these revisions are not out of line with historical values. Job growth estimates remain reliable despite data collection challenges. With the balance of risks surrounding the Fed’s dual mandate now shifting, market participants are projecting an easing of monetary policy in coming months.

Read the full article [archived PDF].