The Decline of Japan's Saving Rate and Demographic Effects

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.