Japan's Saving Rate: New Data and Reflections

Abstract

This paper examines available evidence on Japan's wealth accumulation. Time-series evidence over the last one hundred years indicates that the phenomenon of extraordinarily high Japanese saving rate ia limited to the high-growth era of 1965-1975. Micro evidence about consumption and aaving by age can be more easily explained by the dynasty model than by the lifecycle hypothesis. The infinite horizon neoclassical growth model, while capable of generating the hump in the saving rate and explaining why it was preceded by the rapid GNP growth in the post-war period, leaves unanswered the question of why wealth accumulation in pre-war Japan was so slow. Perhaps growth in pre-war Japan was hampered by harmful effects of misguided government policies.