Overview

Japan's savings are among the highest in the world, and these high rates have played a valuable role throughout the post-war period. The high level of saving has provided the funds needed to finance corporate investment in plant and equipment during the high-growth era of the 1950s to the early 1970s and helped meet capital shortages abroad during the post-1973 era of stable growth. However, over the next several decades, Japan's population will be ageing rapidly. Will this lower Japanese savings rates? Using up-to-date financial and demographical data, author Robert Dekle finds that the answer to this question is an emphatic 'yes'. The ageing of the population currently underway will steadily lower Japan's saving rate from 30 percent of GDP today to 19 percent of GDP in 2040, while Japan's total investment rate will decline from 28 percent of GDP today to about 22 percent of GDP in 2040. Given the more rapid decline in total saving, Japan's current account will steadily narrow from its current level and turn to deficit around 2015. Understanding Japanese Saving holds key lessons for Western nations undergoing similar demographic transformations as well as developing countries looking to establish public savings institutions.

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Robert Dekle is Professor of Economics at the University of Southern California. He has studied the Japanese economic system for more than two decades.

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