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Saving and interest rates in Japan: Why they have fallen and why they will remain low

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  • R.Anton Braun
  • Daisuke Ikeda
  • Douglas H. Joines

Abstract

This paper quantifies the role of alternative shocks in accounting for the recent declines in Japanese saving rates and interest rates and provides some projections about their future course. We consider three distinct sources of variation in saving rates and real interest rates: changes in fertility rates, changes in survival rates, and changes in technology. The empirical relevance of these factors is explored using a computable dynamic OLG model. We find that the combined effects of demographics and slower total factor productivity growth successfully explain both the levels and the magnitudes of the declines in the saving rate and the after-tax real interest rate during the 1990s. Model simulations indicate that the Japanese savings puzzle is over.

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Bibliographic Info

Article provided by Federal Reserve Bank of San Francisco in its journal Proceedings.

Volume (Year): (2006)
Issue (Month): Jun ()
Pages:

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Handle: RePEc:fip:fedfpr:y:2006:i:jun:x:10

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  1. Horioka, Charles Yuji, 1995. "Is Japan's Household Saving Rate Really High?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 41(4), pages 373-97, December.
  2. Hansen, G D, 1993. "The Cyclical and Secular Behaviour of the Labour Input: Comparing Efficiency Units and Hours Worked," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(1), pages 71-80, Jan.-Marc.
  3. Selahattin Imrohoroglu & Ayse Imrohoroglu & Kaiji Chen, 2006. "The Japanese Saving Rate," American Economic Review, American Economic Association, vol. 96(5), pages 1850-1858, December.
  4. Fumio Hayashi, 1995. "Is the Japanese Extended Family Altruistically Linked? A Test based on Engel Curves," NBER Working Papers 5033, National Bureau of Economic Research, Inc.
  5. Hayashi, Fumio & Ito, Takatoshi & Slemrod, Joel, 1988. "Housing finance imperfections, taxation, and private saving: A comparative simulation analysis of the United States and Japan," Journal of the Japanese and International Economies, Elsevier, vol. 2(3), pages 215-238, September.
  6. Charles Yuji Horioka & Hideki Fujisaki & Wako Watanabe & Takatsugu Kouno, 2000. "Are Americans More Altruistic than the Japanese? A U.S.-Japan Comparison of Saving and Bequest Motives," NBER Working Papers 7463, National Bureau of Economic Research, Inc.
  7. Kaiji Chen & Ayse Imrohoroglu & Selo Imrohoroglu, 2005. "Japanese Saving Rate," Macroeconomics 0502017, EconWPA.
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Cited by:
  1. Hiroki Arato & Katsunori Yamada, 2010. "Japan's Intangible Capital and Valuation of Corporations in a Neoclassical Framework," ISER Discussion Paper 0772, Institute of Social and Economic Research, Osaka University, revised Nov 2011.
  2. R. Anton Braun & Daisuke Ikeda & Douglas H. Joines, 2007. "The Saving Rate in Japan: Why It Has Fallen and Why It Will Remain Low," CIRJE F-Series CIRJE-F-535, CIRJE, Faculty of Economics, University of Tokyo.
  3. Kaiji Chen & Ayse Imrohoroglu & Selahattin Imrohoroglu, 2006. "Secular Movements in U.S. Saving and Consumption," 2006 Meeting Papers 154, Society for Economic Dynamics.
  4. Henning Bohn, 2006. "Optimal Private Responses to Demographic Trends: Savings, Bequests and International Mobility," RBA Annual Conference Volume, in: Christopher Kent & Anna Park & Daniel Rees (ed.), Demography and Financial Markets Reserve Bank of Australia.
  5. Tomoaki Yamada & Minchung Hsu & Gary D. Hansen, 2011. "Financing Health Care in Japan: The Impact of an Aging Population," 2011 Meeting Papers 717, Society for Economic Dynamics.
  6. Miguel Sánchez Romero & Naohiro Ogawa & Rikiya Matsukura, 2013. "To give or not to give: bequest estimate and wealth impact based on a CGE model with realistic demography in Japan," MPIDR Working Papers WP-2013-012, Max Planck Institute for Demographic Research, Rostock, Germany.
  7. Iscan, Talan B., 2011. "Productivity growth and the U.S. saving rate," Economic Modelling, Elsevier, vol. 28(1-2), pages 501-514, January.
  8. Akira Okamoto, 2013. "Simulating Public Pension Reforms in an Aging Japan: Welfare Analysis with LSRA Transfers," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 9(4), pages 597-632, September.

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