The Stagnation of Household Consumption in Japan

In this paper, I consider the extent to which the stagnation of household consumption is responsible for the decade-long recession in Japan during the 1990s and early 2000s and the reasons for the stagnation of household consumption during this period and find that the stagnation of private investment (and inventory investment) rather than that of household consumption was the major cause of the decade-long recession, that household consumption was nonetheless relatively stagnant during this decade, and that the stagnation of household consumption was due primarily to the stagnation of household disposable income, the decline in household wealth (which in turn was due primarily to the collapse of land and equity prices), and to a lesser extent, increased uncertainty about the future (especially about old age in general and public old-age pensions in particular), the deterioration of future prospects, and deflationary expectations concerning consumer prices.

A Survey of Household Saving Behavior in Japan

This paper presents data on Japan's household saving rate, considers the reasons for Japan's high household saving rate in the past and the reasons for the recent decline therein, projects future trends in Japan's household saving rate, and consider the implications of my findings. It finds that Japan's high household saving rate was a temporary phenomenon and that it was high in both absolute and relative terms during the 1955-95 period (especially during the 1960s and 1970s) but that it was not unusually high during the prewar and early postwar periods or after 1995; second, that Japan's temporarily high household saving rate was due not to culture but to temporary economic, demographic, and institutional factors; third, that the decline in Japan's household saving rate since the mid-1970s is due to the weakening of these factors and that Japan's household saving rate can be expected to decline even further as these factors become even less applicable and that the rapid aging of Japan's population has played the most important role; and fourth, that there is nothing to worry about even if Japan's household saving rate falls to zero or even negative levels.

Do Bequests Increase or Decrease Wealth Inequalities?

This paper finds that individuals in Japan do not leave very significant bequests, that parents often require a quid pro quo for bequests to their children, and that wealthier individuals leave less bequests, meaning that bequests ameliorate wealth inequalities.

The Dissaving of the Aged Revisited: The Case of Japan

In this paper, I survey the previous literature on the saving behavior of the aged in Japan and then present some survey data on the saving behavior of the aged in Japan that became available recently. To summarize the main findings of this paper, all previous studies as well as the newly available data I analyze find that the retired aged dissave and that even the working aged dissave at very advanced ages. These findings are consistent with the life cycle model and suggest that this model is highly applicable in the case of Japan.

Are the Japanese Unique? An Analysis of Consumption and Saving Behavior in Japan

In this paper, I conduct an analysis of consumption and saving behavior in Japan, looking both at trends over time and comparisons with the other industrialized countries. I find that some of the conventional wisdoms (that the Japanese are asset-rich and hold conservative portfolios) still hold but that others (that the Japanese are high savers and shun borrowing) no longer hold and that the Japanese are not unique, with the United States and the other Anglo-Saxon countries being the true exceptions in many respects.

The Dissaving of the Aged Revisited: The Case of Japan

In this paper, I survey the previous literature on the saving behavior of the aged in Japan and then present some survey data on the saving behavior of the aged in Japan that became available recently. To summarize the main findings of this paper, all previous studies as well as the newly available data I analyze find that the retired aged dissave and that even the working aged dissave at very advanced ages. These findings are consistent with the life cycle model and suggest that this model is highly applicable in the case of Japan.

The Flow of Household Funds in Japan

In this paper, I consider why Japans household saving rate was so high in the past and why it has shown a downward trend in more recent years, and based on this analysis, I project future trends in Japans household saving rate. To preview my main findings, I find, first, that Japans household saving rate used to be high but that it has declined sharply in recent years and that it is no longer high in either absolute or relative terms. Moreover, Japans household saving rate will continue its decline due to the rapid aging of her population and other factors and may well become zero or negative within a few years. However, the governments fiscal deficits (government dissaving) as well as corporate investment in plant and equipment can be expected to decline at the same time, and moreover, there is always the option of borrowing from abroad, so the sharp decline in the household saving rate will not necessarily cause any problems.household saving, Japan

A Comment on Nishimura, Nakajima, and Kiyota's "Does the natural selection mechanism still work in severe recessions? Examination of the Japanese economy in the 1990s"

Nishimura et al. (2005) analyze the entry/exit behavior of Japanese firms during the 1990s and find that relatively efficient firms exited while relatively inefficient firms survived during the banking-crisis period of 1996-97. They conclude that the natural selection mechanism (NSM) apparently malfunctions during severe recessions, but we offer a more plausible interpretation: NSM continued to function effectively even during this period, but aberrant banking practices caused a shift in the type of natural selection from directional to disruptive selection, with the most efficient as well as the least efficient firms being favored and firms of intermediate efficiency being selected against.

Do Borrowing Constraints Matter? An Analysis of Why the Permanent Income Hypothesis Does Not Apply in Japan

We use micro data on young married households from the Japanese Panel Survey of Consumers in order to analyze the importance of borrowing constraints in Japan. We find (1) that 8 to 15 percent of young married Japanese households are borrowing-constrained, (2) that household assets and the husband's educational attainment are the most important determinants of whether or not a household is borrowing-constrained, and (3) that the Euler equation implication is rejected for both the full sample and for the subsample of unconstrained households. These results suggest that the life cycle/permanent income hypothesis does not apply in Japan and that the presence of borrowing constraints is not the main reason why it does not apply.