The Japanese Saving Rate

There have been substantial differences be-tween the Japanese and U.S. saving rates in the last 40 years, which have motivated extensive research in this area (see Figure 1).1 Despite much work, economists have not been able to quantitatively account for the differences in saving rates. In an earlier work, Lawrence J. Christiano (1989) shows that a relatively low initial capital intensity alone is not sufficient for the standard neoclassical model to generate saving rates that come close to replicating Japan’s saving rates. Fu-mio Hayashi et al. (1988) find that housing finance institutions and tax policy do not offer a complete explanation of the large gap be