THE SAVING RATE IN JAPAN: WHY IT HAS FALLEN AND WHY IT WILL REMAIN LOW

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.