1989 Reports

The causes and consequences of Japan's high saving ratio

Hamada, Koichi

Advertisements hang in the Japanese subway trains that ask for more savings in bank deposits. Twice a year, in June and at the end of December, employees receive what they call "bonus" payments that amount to a few months' salary. Advertisers compete for savings out of these extra payments. In America, we also receive many flyers that say "save" and "save." They are not, however, encouragements for savings at all. Thus there are significant differences in economic, social and cultural environment between the two countries. Consequently, people differ in their attitude toward savings and in the magnitude of resulting savings. The significant difference in saving ratios between the two countries accounts for the large trade imbalance between the two countries and bears a drastic implication for the future credit-debt structure in the world economy. This paper discusses the causes and consequences of this large discrepancy in people's saving behavior.