A Yen Saved is a Yen Earned: Deconstructing the Japanese Savings Rate

Smith, James (2014) A Yen Saved is a Yen Earned: Deconstructing the Japanese Savings Rate. Undergraduate thesis, under the direction of Noell Wilson from History , Univeristy of Mississippi .

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Abstract

Since the 1990s, Japan's savings rate has been in decline. In this thesis, I posit two theories to explain this phenomenon. The first, the Demographics Theory, states that the savings rate is declining due to Japan’s aging population, but that this effect is less than in countries with similar demographics. The second, the Employment Theory, states that the savings rate is declining due to a decrease in the number of permanent employees in the Japanese economy. To test these theories, multiple regressions are run using data obtained from governmental agencies and the World Bank. The results for the Demographics Theory gave strong statistical evidence that the aging population has caused a decline in the savings rate, as well as some evidence to suggest that this effect is weaker in Japan than in demographically similar countries. The results for the Employment Theory also showed that the number of permanent employees in the economy is statistically related to the savings rate; however, the relationship was found to be the opposite of the theorized relationship. Instead of the decrease in permanent employees causing the savings rate to decline, it has lessened its decline.

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