Previously, the savings rate in Japan was regarded as one of the peak saving rates all over the world. In the 1980s and the earlier part of 1990s, the savings rate of Japan was more than 10% and it increased at a constant pace and it was more in comparison to any other developed nation in the world. A number of researches have dealt with the increasing trend of savings rate in Japan. Some of them opined that the widespread presence of extended family and legacies is the most significant element making contributions to increased saving. On the other hand, some economists have suggested that precautionary motives and retirement savings are playing a significant role behind the high savings rate.
Saving rate is calculated by dividing the difference between disposable income and consumption expenditures with disposable income. From a macroeconomic point of view, the amount saved should be equal to the amount invested. Higher saving rate may result in higher growth and also increased funding surplus of households.
There are a number of debates that moot that the people in Japan are risk-averse in nature and that is the reason why they have the propensity for saving instead of spending money.
However, a stable decline has been noticed in the savings rate in Japan. Since the year 1998, the saving rate in Japan is showing a speedy downward curve. There are a number of structural elements that may be functional behind this and they include the following:
- Demographic aging process
- Modifications in life style
- Economic fluctuations
- Institutional reforms
