Understanding Japan's Saving Rate: The Reconstruction Hypothesis

Abstract

Over the past 20 years, the Japanese national saving rate has on average exceeded the U.S. national saving rate.This principally reflects the very high level of the Japanese rate in the late 1960s and the early 1970s.Since then the Japanese and U.S. saving rates have been converging, as the Japanese rate has fallen toward the U.S. level.Recently, though, the Japanese saving rate seems to have risen.So, where is that rate going next?One possibility is that the recent increase is permanent and may even signal a return to the very high saving rates observed earlier.Of course, another possibility is that the rate will go down: maybe its recent rise is simply a temporary aberration from the general trend of convergence between the U.S. and Japanese saving rates.Which answer is generally believed has important implications for U.S. trade policy.A widespread belief that the recent Japanese saving rate increase is permanent would encourage those who are pressuring the U.S. Congress to enact protectionist trade legislation.Their idea is that the Japanese people-perhaps out of compulsive frugality-are chronically driven to save more than their own country can absorb in the form of investment.This excess of saving over investment is, by an accounting identity, the Japanese trade surplus and is held responsible for a variety of ills in the United States.If, however, the recent rise in the Japanese saving rate is generally believed to be only temporary, just a blip in an otherwise downward trend, protectionist legislation would have less support.This is because-*Also Research Affiliate, National Bureau of Economic Research.The author has benefited greatly from numerous conversations with S. Rao Aiyagari and V. V. Chari.He is also grateful to Fumio Hayashi for his comments and for providing the Japanese data used in this study.1 An important finding of Hayashi (in his 1986 paper and in his paper in this issue of the Quarterly Review) is that official measures of the Japanese and U.S. saving rates are not comparable because they are based on different accounting concepts.The facts about the Japanese and U.S. saving rates that I describe above are based on data adjusted by Hayashi to assure comparability.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 77 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.