The Saving Rate in Japan: Why It Has Fallen and Why It Will Remain Low*

Abstract

Japan is in the midst of a demographic transition that is larger and more rapid than other OECD countries. We are interested in understanding the role of lower fertility rates and aging for the evolution of Japan's national saving rate. We use a computable general equilibrium model to analyze the response of the saving rate to changes in demographics and total factor productivity. In our model demographic factors account for 2-3 percentage points of the 9% decline in the saving rate between 1990 and 2000 and persistently depress the saving rate in future years. Copyright � (2009) by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

The implications of a graying Japan for government policy

“…Truncating the permissible lifespan when the conditional survival probability falls below one half implies a maximum age of 112 in 2060. 5 Our value of the long-run fertility rate consistent with a stable population is lower than commonly discussed values for two reasons. First, survival probabilities are higher in Japan than in most other countries.…”

“…4 In our benchmark projection, we assume that the total fertility rate increases linearly from 1.34000 in 2060 to 2.01125 in 2160. 5 These fertility and survival rates imply a stationary population in the terminal steady state.…”

Organizational dynamics and aggregate fluctuations: The role of financial relationships

“…For instance, the increase in retired adults due to population aging over the two decades will show up as an increase in the preference on leisure. Alternatively, Braun, Ikeda and Joines (2009) show that the shrinking family size due to the falling birth rate can a¤ect the labor decision. In their model, the head of the household determines the consumption and leisure level of the entire family.…”

“…The …rm knows that their actions will a¤ect the credit spread according to (5) and internalizes this feedback e¤ect when it chooses the allocation of labor between two tasks. The …rm maximizes (6) subject to (7), (8), (9), (10), (11), (12), and (5).…”

“…For simplicity, we assume that the stochastic lag matrix is diagonal 5 : The impulse response functions are computed by solving a linearized set of equilibrium conditions derived from the model. Figures 3a-3d plot the impulse responses of the economy to a 1% increase in each exogenous variable.…”