The paper presents a comparative study of the generation and distribution of seigniorage in Germany and Japan for the sample period 1961-91.Several measures of seigniorage are analysed and a comprehensive framework for measurement of the sources and uses of seigniorage is developed.Specifically,it is shown that the conventional concept of monetary seigniorage overstates government gains from money creation when the foreign and private sectors are the primary recipients of central bank credit.The study also reveals negative real returns on the portfolio of non-government debt for both countries.A major factor has been valuation losses on foreign assets,resulting from the appreciation of the yen and the deutsche mark.Those losses reduced real returns by more than two percentage points on average over the sample period in both countries.
Keywords: Seigniorage;Inflation tax;Bank of Japan;Bundesbank;Foreign exchange losses
Views expressed in the paper are those of the authors and do not necessarily reflect those of the Bank of Japan or Institute for Monetary and Economic Studies.