Japanese Household Savings

Japanese household savings is high in comparison to a number of other countries in Asia. The majority of household savings in Japan is held by the postal savings schemes and banking institutions.

Before the World War II, the household savings rate in Japan was quite fluctuating in nature and the average household savings was substantially less, frequently negative.

During the period of war, the household savings rate was quite high, however, the majority of household savings were forced savings. After the World War II, the household savings rate went up till the mid part of the 1970s. Since that time, it has shown a downward movement. The household saving rate of Japan was one of the maximum in the OECD (Organization for Economic Co-Operation and Development) countries till the 1980s.

Nevertheless, there has been a stable decline in that position since that time and at present, the household saving rate of Japan is below the average household saving rate prevailing in the OECD countries. Therefore, it can be mentioned that the household savings rate of Japan was high both in relative and absolute terms, however it has gone down both in relative and absolute terms. The household savings rate in Japan only experienced significant rises in the 1960s, 1970s and in the earlier part of 1980s.

The reasons behind the household savings rate being high in the above mentioned period could be categorized into the following types:

• The demographic features (especially age)
• Traditional, cultural and religious factors
• The decreased extent of household assets
• The increased rate of growth in income
• The underdeveloped (or developing) consumer credit arrangement
• The underdeveloped (or developing) social security arrangement
• Saving encouragement functions
• Tax benefits for saving

The majority of these factors were not so much prevalent since the mid part of 1970s and that is why household saving rate in Japan is falling since that time. This can be delineated as follows:

• Enervating of tradition and culture
• Fast aging of the inhabitants of Japan
• The fall in the income growth rate since the earlier part of 1970s
• Rises in the extent of household assets
• Developments in the social security arrangement since 1973
• Developments in the consumer credit arrangement since the 1970s
• The abolishment of the majority of tax benefits for saving since 1988
• The abolishment of the majority of saving encouragement functions