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The Decline of Japan's Saving Rate and Demographic Effects*1

July 2005
Maiko Koga*2

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  • *1 I would like to thank Shin-ichi Fukuda (the University of Tokyo), Fumio Hayashi (the University of Tokyo), Charles Yuji Horioka (Osaka University), Kazuo Ogawa (Osaka University), Etsuro Shioji (Yokohama National University), Naohiro Yashiro (Japan Center for Economic Research), Masahiro Higo (Bank of Japan), Munehisa Kasuya (Bank of Japan), Kenji Nishizaki (Bank of Japan), seminar participants at CIRJE-TCER Macroeconomic conference, and other Bank of Japan staff for their helpful comments and suggestions. The views and opinions expressed in this paper are my own, and do not necessarily reflect those of the Bank of Japan nor the Research and Statistics Department. This is a substantially revised version of my previous working paper published in Japanese (BOJ Working Paper, No. 04-J-12).
  • *2 Research and Statistics Department (currently, International Department), Bank of Japan.
    (Email: maiko.koga@boj.or.jp)

Abstract

This paper investigates the phenomenon in which Japan's household saving rate showed a sharp decline even during the long stagnation period called "the lost decade." Our empirical results show that the sharp decline in the saving rate in the 1990's can be explained by the significant impact of demographic factors. Furthermore, the estimated life-cycle curve is hump-shaped and this means that the prediction of the life-cycle model is confirmed with time-series data on the Japanese saving rate.

Keywords:
Saving rate, Demographics, Life-cycle model.

JEL classifications:
E21, E27