Economista

This PDF is a selection from an out-of-print volume from the National Bureau of Economic Research

Volume Title: NBER Macroeconomics Annual 1986, Volume 1
Volume Author/Editor: Stanley Fischer, editor
Volume Publisher: MIT Press
Volume ISBN: 0-262-06105-8
Volume URL: http://www.nber.org/books/fisc86-1
Publication Date: 1986

Chapter Title: Why Is Japan's Saving Rate So Apparently High?Chapter Author: Fumio Hayashi
Chapter URL: http://www.nber.org/chapters/c4247
Chapter pages in book: (p. 147 - 234)

Fumió Hayashi
OSAKA UNWERSITY, JAPAN

Why Is Japan's Saving Rate
So Apparently High?
1. Introduction
The huge U.S. trade deficit with Japan, which totaled $50 billion in 1985
and accounts for a thumping one-third of the total U.S. trade deficit, has
worried policymakers and economists alike for some time. The widening trade gap has cost jobs in the United States, particularly in the manu-

facturing sector, providing ample ammunition for protettionists. The
identity in the national income accounts states that the excess of saving
over investment equals the trade surplus. The blame for Japan's large
trade surplus with the United States must therefore fallon Japan's high
saving or her slumping investment. The widespread sentiment that the
Japanese save too much was even echoed in a 1985 speech by the U.S.
Secretary of State.1 The sentiment has some empirical grounds. In 1984
the most widely mentioned saving rate—the rate of personal saving—
was 16 percent for Japan, a full 10 percentage points higher than that in
the United States.
Thepurpose of this article is to explore possible factors that contribute

to Japan's high saving rate. That Japan's saving rate is high by international standards has been recognized in Japan for more than two decades, yet the reason for it is poorly understood: I quote the last sentence
of a recent survey in the Japanese literature. "In any event . . . Japan's
high personal saving rate remains amystery to be resolved."2 It is not
that empirical investigations have been hampered by a scarcity of data.

Although consistent time series in the Japanese national income accounts do not start until 1965, a large amount of micro data on houseShultz's speech at Princeton University attracted widespread attention in the
Japanese press.
2. Kurosaka and Hamada (1984).
1. George

148 HAYASHIholds is available from various surveys that have been conducted
regularly by the Japanese government. Perhaps the issue of Japan's high

saving rate has not attracted enough of the empirical attention it
deserves.
I will begin with very down-to-earth facts about aggregate saving in

Japan and the United States. Those are contained in section 2, which
tries to see if the perception of highsavings in Japan has any empirical
basis. It will be argued that some conceptual differences between U.S.
and Japanese national accounting explain a substantial portion of the ol,served differences in the saving rates. Section 3 summarizes the explanations that have been offered in the literature, (I will examine them further
in later sections.) The first theory of saving, to be taken up insection 4, is
the life-cycle hypothesis. After rejecting the life-cycle explanations, I

turn in section 5 to micro data on households analyzed by age group
to locate possible deviations from the life-cycle hypothesis of the actual
Japanese saving behavior. It turns out that the cross-section age profile of
saving in Japan appears to defy any simple life-cycle explanation, including anexplanation based on the high housing-related saving by younger
generations. Continuing the theme at the end of section 5 that bequests
might be an important factor, section 6 digresses somewhat to calculate

the aggregate flow of intergenerational transfers that can be inferred
from the cross-section saving profiles. Other aspects of household behavior, including the impact of social security,...