Through fast aging, the ratio of aged citizens is the maximum in developed nations. At the same time, the old-age index or the ratio of citizens, aged more than 65 to the entire number of inhabitants would figure at 35.7% in the year 2050.
The life-cycle theory is considered as one of the important representative consumption theories, which demonstrate that when a rational family unit might save a portion of their earnings in early life, they might use up their savings following their retirement.
In accordance to this theory, if the percentage of the aged citizens to the entire number of citizens goes up, the rate of savings on the whole would go down. In the year 1997, Watanabe and Horioka discovered that Japanese family units have a saving tendency at every phase of life for suitable purposes, which differ significantly by means of age and are very much corresponding with the life cycle model. In addition, a number of experimental researches, for example a study by Koga (in the year 2006) delineate that an old population was the primary reason behind the steep fall in the saving rate of Japan in the decade of 1990s. At the same time, the projected life-cycle curve was shaped like a hump and this is compatible with the anticipation of the theory.
The demographic effect behind the savings rate of Japan is regarded by the economists as a principal structural factor.
