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This paper re-examines whether the money supply (M2 + CDs) can predict future economic activity in Japan, using recent data to the end of 2003. I find that the linkage between M2 and income or prices has largely disappeared since the late 1990s. Evidence suggests that (i) time deposit behaviour is primarily responsible for the breakdown in the M2-income relationship; (ii) bank loans also lost their predictive content in the late 1990s; and (iii) there has been a close link between time deposits and bank loans. Nonperforming loans problems and ongoing restructuring may be root causes of these findings. JEL Classification Numbers: E51, E52.