Why Does Japan’s Saving Rate Decline So Rapidly?

The saving rate in Japan has declined rapidly. Analyzing the possible four factors that could affect the saving rate in general, compared with theoretical implications, the data suggest that all elements might have a negative impact on the saving rate during the late 90s and early 00s. Such a rapid decline of the saving rate might be caused by the fact that all factors have the same downtrend. Structural factors, such as demography and changes of time preference, would keep the current trend of down pressure on the saving rate with high probability. On the other hand, it might be difficult to forecast the effect of cyclical factors, such as economic fluctuation and institutional reform, because their impacts on the future rates could depend on economic or social situation at that time. As a result, as there will be a strong downward pressure, the saving rate will continue to decline or level off at least.savings, income tax, Japan, demography