Key Points
- Dollar credit grew by 8.5% year-on-year, reaching $14.3 trillion by December 2025.
- Euro-denominated credit expanded by 11%, totaling €4.9 trillion at year-end.
- Japanese yen credit contracted by 4.9%, indicating a significant decline.
- Dollar credit to emerging markets rose from $3.2 trillion in 2015 to $4.3 trillion in 2025.
Analysis
The Bank for International Settlements (BIS) has published its global liquidity indicators for the end of December 2025, revealing notable trends in foreign currency credit. The data indicates that foreign currency credit in US dollars and euros has seen substantial growth, while credit in Japanese yen has experienced a significant contraction. Specifically, dollar credit expanded by 8.5% year-on-year, reaching a total outstanding stock of $14.3 trillion, marking the highest growth rate since Q3 2014.
This increase reflects a broader trend of rising dollar credit outside the United States, driven by both bank loans and international bond issuance. Concurrently, euro-denominated credit also demonstrated significant growth, rising by 11% year-on-year to reach €4.9 trillion, continuing a positive trajectory that has been evident since Q1 2013. In stark contrast, yen credit contracted by 4.9% during the same period, suggesting a shift in investor sentiment and demand for yen-denominated assets.
The BIS data further highlights that dollar credit to emerging markets and developing economies (EMDEs) surged from $3.2 trillion at the end of 2015 to $4.3 trillion by the end of 2025, marking a 35% increase. This growth has been characterized by distinct phases, particularly following the onset of the Covid-19 pandemic, where dollar credit to EMDEs initially grew at an average annual rate of 5.6% until mid-2022, before entering a contraction phase amid US monetary tightening. Emerging Europe has notably accelerated its dollar credit growth in recent years, while regions such as Africa and the Middle East have consistently outpaced others in dollar credit expansion.
Euro credit to EMDEs has mirrored this growth, nearly doubling from €437 billion to €858 billion over the same period, with an annual growth rate of 12% observed by the end of 2025. These trends underscore the evolving landscape of global liquidity, where demand for dollar and euro credit remains robust, particularly in emerging markets. The sustained growth in these currencies contrasts sharply with the decline in yen credit, indicating a shift in global financial flows and investor preferences.
As the global economy continues to navigate uncertainties, these liquidity indicators will be crucial for understanding the dynamics of international finance and the potential implications for monetary policy and economic stability.
Market Impact
The ongoing growth in dollar and euro credit is expected to enhance investor confidence in emerging markets, potentially leading to increased capital inflows. This trend may also influence central banks’ monetary policy decisions, especially concerning inflation and interest rates. Conversely, the contraction in yen credit could indicate tightening liquidity conditions in Japan, which may hinder its economic recovery.
Overall, these liquidity indicators will be closely monitored by market participants as they evaluate the implications for global economic stability and growth.
Sources
Bank for International Settlements / Credit and Liquidity Statistics