WHY IS JAPAN'S NATIONAL SAVING RATE SO HIGH?

Abstract

Domestic savings are the best and most reliable source of funds for economic development. In Japan, its high national savings has been the main engine behind the rapid economic expansion. Despite the numerous studies on the determinants of Japan's high national saving rate, conclusions made on this topic are still subject to much controversy. In spite of the fact that there is no way of identifying the exact contribution of each of the factors, high economic growth, high housing prices, age structure of the population intergenerational transfers, low level of social security benefits, the bonus system as well as its culture are found to have influenced the Japanese saving rate positively during the period of analysis. However, an ageing population in the future would likely see a downward shift in the national saving rate. In comparing with Singapore, the study reveals that while Japan's high national saving rate is an unique experience where there's a combination of factors favouring saving, Singapore's high saving ratio is mainly due to the presence of firm and committed public policies that have not only raised the private savings, but have also contributed to high public sector savings. Low saving countries could adopt Singapore's macroeconomic policies as the sensible approach to increasing their countries saving rate. By reviewing the factors that have been mentioned as possible causes for Japan's national savings, this Academic Exercise hopes to achieve the aim of providing a better understanding of Japan's high national savings.