Saving and investment in Japan

Abstract

This paper traces movements of saving and investment in the Japanese economy over the four decades after World War II. The postwar decades may be divided conveniently into four periods: the reconstruction period (1945-1952) in which saving was in absolutely short supply; the normalization period (1952-1959) when the economy returned to normalcy; the rapid growth period (1960-1973) when saving and investment were balanced at a very high level so as to make rapid growth achievable; and the slow grown period (1974-present) in which saving exceeded investment in the private economy. This paper presents international comparisons between the Japanese economy and other industrializing Asian economies that have high savings rates. The paper then examines the individual sectors of the economy -- personal savings ratios, corporate saving and investment ratios, fiscal policy, and monetary policy. This paper then explains the transition of the Japanese economy from a neoclassical model economy to a Keynesian model economy. Finally, the paper concludes with the hope that the private sector will begin investing again, in order to prevent disequilibria in the government and external sectors