The Household Savings Rate Paradox - The Population is Aging, but Workers' Households are Saving More

Policy Research Department Chief economist Yasuhide Yajima

Introduction

Japan’s population is aging at an accelerating pace. In 2000， the 65-and-over age segment comprised 17.3 percent of the population， up from 12 percent in 1990. This represents an increase of 5.3 percentage- points in the 1990s， compared to the more modest increases of 3.0 percentage-points in the 1980s and 2.0 percentage-points in the 1970s. Normally， such accelerated aging is accompanied by a decline in the savings rate. But in Japan’s case， the savings rate among workers’ households has actually climbed from 22.1 percent in 1980， to 24.7 percent in 1990， and 27.9 percent in 2000.

This paper examines savings rate trends amid the accelerated aging by distinguishing two contributing factors: changes in the age composition of the population， and changes in savings rates in each age segment. First， we show that while the proportion of non-working households has risen， the weighted-average savings rate for workers’ households and non-working households has remained steady. Next， we confirm that the savings rate of workers’ households has risen even after adjusting for changes in the home ownership ratio. Finally， we examine the rapid growth in precautionary savings among younger persons and their mounting anxieties about employment and retirement.