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Why Does Japan’s Saving Rate Decline So Rapidly?

Author

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  • Kentaro Katayama

    (Policy Research Institute, Ministry of Finance, Japan)

Abstract

The saving rate in Japan has declined rapidly. Analyzing the possible four factors that could affect the saving rate in general, compared with theoretical implications, the data suggest that all elements might have a negative impact on the saving rate during the late 90s and early 00s. Such a rapid decline of the saving rate might be caused by the fact that all factors have the same downtrend. Structural factors, such as demography and changes of time preference, would keep the current trend of down pressure on the saving rate with high probability. On the other hand, it might be difficult to forecast the effect of cyclical factors, such as economic fluctuation and institutional reform, because their impacts on the future rates could depend on economic or social situation at that time. As a result, as there will be a strong downward pressure, the saving rate will continue to decline or level off at least.

Suggested Citation

  • Kentaro Katayama, 2006. "Why Does Japan’s Saving Rate Decline So Rapidly?," Finance Working Papers 22032, East Asian Bureau of Economic Research.
    • Handle: RePEc:eab:financ:22032
    as

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    File URL: http://www.eaber.org/node/22032
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    References listed on IDEAS

    as
    1. Charles Yuji Horioka, 2002. "Are the Japanese Selfish, Altruistic or Dynastic?," The Japanese Economic Review, Japanese Economic Association, vol. 53(1), pages 26-54, March.
    2. Fumio Hayashi, 1985. "The Permanent Income Hypothesis and Consumption Durability: Analysis Based on Japanese Panel Data," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(4), pages 1083-1113.
    3. Horioka, Charles Yuji & Watanabe, Wako, 1997. "Why Do People Save? A Micro-Analysis of Motives for Household Saving in Japan," Economic Journal, Royal Economic Society, vol. 107(442), pages 537-552, May.
    4. Fumio Hayashi, 1986. "Why Is Japan's Saving Rate So Apparently High?," NBER Chapters, in: NBER Macroeconomics Annual 1986, Volume 1, pages 147-234, National Bureau of Economic Research, Inc.
    5. Charlet Yuji Horioka, 2002. ""Are the Japanese Selfish, Altruistic, or Dynastic?" (in Japanese)," CIRJE J-Series CIRJE-J-70, CIRJE, Faculty of Economics, University of Tokyo.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    savings; income tax; Japan; demography;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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