Discussion Paper No. 606

ARE THE JAPANESE UNIQUE?
AN ANALYSIS OF
CONSUMPTION AND SAVING BEHAVIOR
IN JAPAN

Charles Yuji Horioka

June 2004
Revised June 2004

The Institute of Social and Economic Research
Osaka University
6-1 Mihogaoka, Ibaraki, Osaka 567-0047, Japan

ARE THE JAPANESE UNIQUE?

AN ANALYSIS OF

CONSUMPTION AND SAVING BEHAVIOR IN JAPAN*
Charles Yuji Horioka

March 2003; revised January 2004, May 2004, June 2004

Abstract:

In this paper, I conduct an analysis of consumption and saving behavior in Japan,

looking both at trends over time and comparisons with the other industrialized countries.

Ifind that some of the conventional wisdoms (that the Japanese are asset-rich and holdconservative portfolios) still hold but that others (that the Japanese are high savers and shunborrowing) no longer hold and that the Japanese are not unique, with the United States and theother Anglo-Saxon countries being the true exceptions in many respects.

Contact information:Charles Yuji Horioka, Institute of Social and Economic Research, Osaka

University, 6-1, Mihogaoka, Ibaraki, Osaka 567-0047, JAPAN.
Telephone: 81-(0)6-6879-8586(direct-dial),

8574

(to

leave

a

message),facsimile:

81-(0)6-6878-2766, email: horioka@iser.osaka-u.ac.jp*I am grateful to Takatsugu Akaishi, Sheldon Garon, Patricia Maclachlan, Sven Steinmo, andthe other participants of the two conferences on “Consumer Culture and Its Discontents” and to
Shizuka Sekita, Midori Wakabayashi, and the other participants of my graduate seminar for theirinvaluable comments and insights and to the Ministry of Education, Culture, Sports, Science,
and Technology of the Japanese Government for Grant-in-Aid for Scientific Research number
12124207.

Japanese people often trumpet their putatively “unique” characteristics vis-à-vis othernations.

This is particularly evident with respect to their saving and consumption behavior.

According to various public opinion surveys, Japanese respondents overwhelmingly describe
themselves as a people who love to save while exercising uncommon frugality in theirconsumption. 1

By contrast, Western observers have generally criticized the Japanese forextolling such thriftiness and for saving too much and consuming too little. For example, inthe early 1980’s, when Japan was running record trade and current account surpluses, the UnitedStates and Japan’s other trading partners urged the Japanese government to promote
consumption rather than saving as a way of reducing those surpluses, and the so-called
Maekawa Report (which stressed the need to make Japan into a more consumption-oriented
society) was the Japanese government’s response to such criticism.

The conventional

wisdom, whether Japanese or foreign, regards the Japanese as big savers who shun borrowing
and hold unusually conservative portfolios; the only difference is whether this is regarded as agood thing or a bad thing.
This chapter marshals comparative data to examine whether Japanese saving andconsumption is truly so distinctive.

Although we commonly compare Japan to “the West,” theWestern countries themselves demonstrate considerable variation in their saving andconsumption patterns.

How then does the saving and consumption behavior of the Japanesecompare to that of other industrialized countries (notably the other Group of Seven or G7
countries)?

If Japan does resemble some of the Western countries, is it more similar to theAnglo-Saxon countries or to continental Europe?

By exploring changes in saving andconsumption behavior over time, this chapter also challenges the conventional view of Japanesethrift and frugality as static traits.

1

I. The Saving Behavior of the Japanese
Are the Japanese Big Savers?
Do the Japanese save more than consumers in other countries?

To answer thisquestion, I examine trends over time within Japan, followed by an international comparison.

Ithen seek to explain Japanese saving behavior in the past, present, and future.
(1) Trends over Time.

As I have shown elsewhere,2 Japan’s household saving rate

was volatile during the prewar, wartime, and early postwar periods.

Saving rates were low,sometimes even negative, during about half of the years in this period (1907-15, 1921-30, and1946-49). However, saving rates were high and generally in the double digits, during the otheryears (1906, 1916-20, 1931-44, and 1950-54).

Indeed, household saving rates exceeded 30 oreven 40 percent at the height of World War II (1941-44), when goods were scarce or rationed
and when the state encouraged and often forced people to save.

Thus, there is no simple

answer to the question of whether Japan’s household saving rates were high or low from 1906 to
1954.

Saving rates ranged from negative to astonishingly high levels.
Before we can assess saving rates in more recent decades, a methodological note is inorder.

Scholars disagree in their interpretations of recent Japanese saving behavior, in part

because the Japanese government switched from the United Nations’ System of National
Accounts 1968 (SNA68) to the U.N.’s System of National Accounts 1993 (SNA93) in 2002, asa result of which a continuous time series for the entire postwar period is unfortunately notavailable.

Figure 1 shows National Accounts data on Japan’s household saving rate based on

both Systems of National Accounts for the 1955-2002 period.

Data based on both Systems of

National Accounts are available for the 1980-98 period, and as can be seen from Figure 1, thetwo series were relatively close in 1980-94 (within 2.6 percentage points).

2

However, the gap

between the two series widened to 3.3 to 4.9 percentage points in 1995-98 (with the series basedon SNA93 falling below the SNA68 series except in 1990-91).

Moreover, trends in thehousehold saving rate after 1991 differ greatly depending on which SNA we use.

The SNA68

series leveled off in the 12.6 to 13.7 percent range during the 1991-98 period, whereas the
SNA93 series reveals a sharp decline from 13.3 percent in 1991 to 5.4 percent in 2002.

Which

series are we to believe?
The biggest difference between the two series lies in the treatment of bad loans.

The

older SNA68 exaggerates the household saving rate for the following reason: under SNA68,
write-offs of bad loans to households and unincorporated businesses are treated as a current
transfer from financial institutions to households.

Thus, bad loan write-offs increase theincomes of households, and since their consumption does not change, their saving appears toincrease.

By contrast, SNA93 treats write-offs of bad loans to households and unincorporated

businesses as a decline in the asset holdings of financial institutions, and thus they do not affectthe saving rates of households.
The leveling off of the SNA68 saving rate after 1991 primarily reflects the write-offs
of bad loans to households and unincorporated businesses that financial institutions starting
taking after the collapse of the bubble and is thus likely to be a temporary phenomenon.

If nowrite-offs of bad loans had been taken during this period, the SNA68 series would no doubt
have revealed the same sharp decline as the SNA93 series.

I have much more faith in theseries based on SNA93, and thus it appears that Japan’s household saving rate declined steadily
after 1991 and that it is no longer high by either absolute or relative standards.3
As Figure 1 shows, Japan’s household saving rate was high (in the double digits) until
the mid-1990s, peaking at 23.2 percent in 1974 and 1976 before declining sharply.

It exceeded

20 percent during the 1973-78 period, 15 percent during most of the 1961-86 period, and 10

3percent during the 1955-98 period (in the case of the series based on SNA68) and the 1955-95
period (in the case of the series based on SNA93).

However, the more accurate SNA93 series

has been in the single digits since 1996, falling to a paltry 5.4 percent in 2002.
To sum up, Japan’s household saving rates were high during most of the postwar
period (1955-95), but they have been low since 1996.
(2) International Comparison.

Cross-national comparisons of saving rates present

even greater methodological challenges.

Data on household saving rates are available fortwenty-one of the Organization for Economic Cooperation and Development (OECD) member
countries.

However, for thirteen of these countries (including Japan), the data measure the net

household saving rate, whereas for the other eight countries, they measure the gross householdsaving rate.

The difference is significant.

In the case of the net household saving rate, thenumerator (household saving) and denominator (household disposable income) both exclude thedepreciation (consumption of fixed capital) of households and unincorporated businesses
whereas both the numerator and denominator of the gross household saving rate include
depreciation.

Thus, the two are not comparable, and the gross household saving rate willinvariably be much higher than the net household saving rate.

Because I wanted to compare

the household saving rates of all OECD member countries for which data are available, I
converted the gross household saving rate figures to a net basis by using a conversion factor of
0.7 (which is the approximate ratio of the average net household saving rate to the average grosshousehold saving rate for the countries and years used in the present analysis).
My comparative data challenge the conventional view that the Japanese are uniquely
thrifty and/or high savers for all times.

Table 1 presents actual or estimated data on net

household saving rates for the 1985-2002 period for the twenty-one OECD member countries
for which data are available (Table 1A shows actual data on net and gross household saving

4

rates for the same years and the same countries).
but not uniquely, high savers.

The Japanese entered this period as notably,

As Table 1 shows, in 1985, Japan’s household saving rate (16.5

percent) was second only to Italy (21.5 percent) among the OECD member countries for whichdata are available, followed closely by Canada (15.8 percent) and South Korea (14.8 percent).
Thereafter, however, Japan‘s household saving rate fell sharply both in level and rank, from
16.5 percent in 1985 to 5.9 percent in 20024 and from second in 1985 to fourth to sixth in1990-2000 and to thirteenth in 2002 among the OCED countries for which data are available.
When Japan’s household saving rate is compared to the OECD mean, it was nearly twice ashigh in 1985 but slightly lower in 2002.
It is noteworthy that Japan has shared the distinction of being a big saver with avariety of nations in both Europe and East Asia.

Among the OECD member countries forwhich data are available, the number one saver was Italy in 1985, South Korea (the only other
East Asian member) in 1990, the Czech Republic in 1995 and 2000, and France in 2002.
Other OECD members that have attained double-digit household saving rates at least once
include Australia, Austria, Belgium, Canada, Germany, the Netherlands, and Spain.

If we

confine our comparison to the Group of Seven (G7) countries (Canada, France, Germany, Italy,
Japan, the United Kingdom, and the United States), Japan was second only to Italy during the
1985-95 period but fell to third (a tie) behind France and Italy in 2000 and to fourth behindFrance, Italy, and Germany in 2002.

Moreover, there are many non-OECD economies in Asia

(such as China, Hong Kong, Singapore, and Taiwan) that appear to have higher householdsaving rates than Japan at present, notwithstanding the absence of comparable data.
In addition, the Japanese government appears to have overestimated Japan’s
household saving rate vis-à-vis other countries, with several conceptual differences anddeficiencies in Japan’s official data imparting an upward bias in the level of Japan’s household

5saving rate.5
Although it is beyond the confines of this chapter, we should also note substantial
variations in household saving rates among the Western nations.

The OECD member countries

with the lowest household saving rates (those not exceeding 10 percent during the 1985-2002
period) include Denmark, Finland, New Zealand, Norway, Portugal, Sweden, Switzerland, theUnited Kingdom, and notably the United States.
To sum up, the cross-national data challenge us to reevaluate our understanding ofsaving behavior in Japan and elsewhere.

First, the Japanese were unquestionably big savers

until the mid-1990s, but they were hardly unique and showed a household saving rate that was
roughly comparable to that of several leading continental European nations as well as to that ofSouth Korea, a country that has long emulated Japan’s developmental policies.

These data

present a challenge to those who insist that the Japanese are uniquely thrifty or that East Asians
are systematically more inclined to save than “Westerners.”
Second, the data also reveal that the United States and the other Anglo-Saxon
countries (in particular, New Zealand and the United Kingdom) are more of an exception thanJapan, showing virtually the lowest household saving rates among the major industrializedcountries.
Lastly, the data show that, in recent years, Japan’s household saving rate has fallen far
below that of Europe’s leading savers and that it is converging to Anglo-Saxon levels, and I
argue in section (4) below that it will decline even further in the future.
(3) Why Were the Japanese Big Savers?

Elsewhere, I list more than thirty factorsthat have been invoked to explain Japan’s high household saving rate during much of the
postwar period.6

Here, I examine what I consider to be the nine most salient factors.

First, the high rate of income growth during the high-growth era from the 1950s to

6early 1970s undoubtedly helped raise Japan’s household saving rate.

When income grows too

rapidly or unexpectedly, households often cannot adjust their living standards and consumption
patterns at the same pace, and as a result, saving (the difference between income andconsumption) tends to increase, at least temporarily.
Second, household asset holdings were very low in Japan just after the Second WorldWar.

The war destroyed much of Japan’s housing stock, and the postwar hyperinflation

reduced the real value of financial assets to almost nothing.

Japanese households presumably

saved as much as they did in part to restore their asset holdings to desired levels.
Third, consumer credit was not readily available in Japan until recently, as I will
discuss later.

As a result, Japanese households found it necessary to save in advance of majorpurchases such as purchases of housing, automobiles, furniture, and electrical appliances.
Moreover, the paucity of credit also increased the need for precautionary saving because
Japanese households knew that they would not be able to borrow in times of emergency.
Fourth, Japan’s bonus system of compensation, whereby a large chunk of employeecompensation is paid in the form of semiannual lump-sum bonuses, is often said to haveencouraged or at least facilitated saving.
Fifth, the age structure of Japan’s population was virtually the youngest among theindustrialized countries until recently.

As Table 2 shows, in 1975, the share of the elderly(those aged 65 or older) in Japan’s total population was only 7.9 percent.

Among the OECDmember countries Japan ranked second to last behind South Korea at 3.6 percent.

Accordingto the life cycle hypothesis, the aggregate household saving rate will be higher in a country witha young population because the young typically work and save whereas the elderly typicallyretire from work and dissave.7
Sixth, the Japanese government introduced many tax breaks for saving such as the7maruyū system (whereby the interest income on bank and postal deposits and on government
bonds was tax-exempt, up to a limit).

These tax breaks may have induced Japanesehouseholds to save more than they would have otherwise.
Seventh, public old-age pension benefits were relatively low in Japan until 1973.
This made it necessary for Japanese households to save on their own to prepare for their life
after retirement.
Eighth, the Japanese government and a quasi-governmental organization formerly
called the Central Council for Savings Promotion engaged in a variety of saving promotion
activities.

Sheldon Garon has argued that these helped to raise the household saving rate inJapan.8
Ninth, many attribute Japan’s high household saving rate to cultural factors.

Theyargue that frugality, considered a virtue in Confucian teachings, is part of the national characterof the Japanese people.
However, all of these factors are becoming less and less applicable over time.

(1)

Double-digit rates of economic growth ended in the early 1970s, and income growth rates havebeen embarrassingly low in recent years, especially in the 1990s; (2) Japanese households haveaccumulated high levels of assets (see below); (3) consumer credit has become widely available(see below), (4) most companies have scaled back bonuses as a result of the prolonged recession,(5) Japan’s population is aging at an unprecedented rate, with the share of the population aged
65 or older to the total population rising from 7.9 percent (next to last place) in 1975 to 17.2
percent (third place) in 2000 (see Table 2); (6) most tax breaks for saving were abolished in
1988; (7) public old-age pension benefits were dramatically improved in 1973; (8) government
saving promotion activities have been scaled back, and the Central Council for Savings
Promotion was renamed the Central Council for Savings Information in 1988, due in large part8

to pressure from Japan’s trading partners, although private sector initiatives remain; and (9) the
longstanding culture of thrift may decline over time as foreign influences infiltrate the country.
The weakening of these factors can explain why Japan’s household saving rate has declined so
sharply since the mid-1970s.
(4) Will the Japanese Once Again Become Big Savers?

In my opinion, the mostimportant factor determining future trends in Japan’s household saving rate will be the rapid
aging of the population. Japan’s population is aging rapidly and will soon become the mostaged in the world.

As Table 2 shows, the share of the population aged 65 or older to the total

population in Japan is projected to increase from 17.2 percent in 2000 to 28.9 percent (highest
among the OECD member countries) in 2025.

An aged population will save at lower rates,

just as a younger population will save at higher levels, according to the life cycle hypothesis.
When young, individuals generally work and save a portion of their incomes, while after
retirement, they dissave their previously accumulated savings.

Thus, the rapid aging ofJapan’s population has presumably contributed to the sustained decline in its household savingrate in recent years.

With the aging of Japan’s population projected to continue at a rapid rate,

the decline in its household saving rate can also be expected to continue at a rapid rate.

Indeed,a number of authors, myself included, have calculated that the rapid aging of Japan’s population
will cause Japan’s household saving rate to decline to zero or even negative levels by around2010.9
I should note, however, that the discussion thus far has focused exclusively on theimpact of the aging of the population on the household saving rate.

There are, of course, otherfactors that will influence the household saving rate, and I now discuss four short-term factorsthat may have been important during the current recession that began in 1991.10
First, sharp declines in land and equity prices have led to sharp declines in the value of9household holdings of land and equities, and this in turn should have encouraged households tosave more in order to make up for the capital losses on their land and equity holdings.
Second, the current recession has undoubtedly increased the anxieties that theJapanese harbor about future income and employment prospects, living expenses during old age,and public old-age pensions.

These increased anxieties should also have encouraged

households to save more.
Third, consumer price deflation has continued for a number of years.

It, too, shouldhave encouraged households to save more because, in a situation in which consumer prices are
declining over time, households can save money by postponing their purchases of consumer
goods and services.

However, consumer price deflation will also increase the real value ofhousehold holdings of financial assets, which in turn will induce people to consume more andsave less.

In short, the net impact of consumer price deflation on the household saving rate istheoretically ambiguous.
Fourth, the profits of individual proprietors have been stagnant during the current
recession, and this has lessened their ability to save, thereby lowering the saving rate of thehousehold sector as a whole.
In sum, two of these short-term factors should have held up Japan’s household savingrate during the past decade, one of them should have put downward pressure thereon, and one ofthem appears to be ambiguous in its impact. Thus, even if the Japanese economy recovers
from the current recession and these short-term factors cease to apply, recovery should not havea substantial impact on Japan’s household saving rate.
household rate will continue its rapid decline.

Are the Japanese Asset-Rich?

10

In either event, I predict that Japan’sHigh saving rates usually lead to high asset or wealth holdings because wealth issimply the cumulation of past saving.

Thus, in this subsection, I turn my attention from saving

to wealth and consider whether the asset or wealth holdings of the Japanese are high absolutely
as well as relative to the other industrialized countries.
Table 3 shows data on household wealth and indebtedness for the Group of Seven(G7) countries for the 1990-2001 period.

Looking first at data on net wealth or net worth (thebroadest concept of wealth, defined as financial assets plus non-financial or real assets minus
liabilities), Japan ranked first among the G7 countries in all four of the years for which data areshown even though net wealth or net worth declined sharply after 1990 due to the collapse of
the bubble (the collapse of land and equity prices)--from a whopping 9.5 times household
disposable income in 1990 to 7.5 to 7.6 times household disposable income in 1995, 2000, and2001.

The corresponding ratio was 6.4 to 7.5 times in Italy, 5.6 to 7.5 times in the United

Kingdom, 5.1 to 6.3 times in France, 5.4 to 5.8 times in Germany, 4.7 to 5.9 times in the UnitedStates, and 4.2 to 5.1 times in Canada.
Moreover, the individual components of household wealth were also generally muchhigher in Japan.

For example, Japan ranked first among the G7 countries with respect tofinancial assets in three out of the four years for which data are shown (1990, 1995, and 2001)
and was second behind the United Kingdom in the remaining year (2000), with financial asset
holdings ranging from 4.0 to 4.8 times household disposable income.

Similarly, Japan ranked

second behind Italy among the G7 countries with respect to non-financial or real assets (land,
housing, and consumer durables) in three out of the four years for which data are shown (1995,
2000, and 2001) and was first in the remaining year (1990), with holdings of non-financial orreal assets ranging from 4.1 to 6.8 times household disposable income.

Finally, Japan ranked

first among the G7 countries with respect to total assets (the sum of financial assets and11non-financial assets) in all four years for which data are shown, with total asset holdings
ranging from 8.9 to 10.8 times household disposable income.
In terms of trends over time, non-financial or real assets declined sharply throughout
the 1990-2001 period due to the sharp decline in land prices while financial assets continued toincrease throughout this period despite the sharp decline in equity prices.

As a result of theseconflicting trends, both total assets and net wealth or net worth declined sharply between 1990
and 1995 but stabilized thereafter.
Thus, it appears that the Japanese are indeed asset-rich both absolutely as well as
relative to the other G7 countries.

This enormous wealth of the Japanese is presumably due

partly to their high saving rates and partly to the rapid increase in land and equity prices duringmuch of the postwar period, but since Japanese household saving rates are no longer unusuallyhigh and since land and equity prices have been plummeting for more than a decade, both thelevel of household wealth in Japan and the gap in household wealth between Japan and the otherG7 countries are much lower now than they were a decade ago and can be expected to decline
even further in the future.

Do the Japanese Shun Borrowing?
Typically, high saving and low borrowing go hand in hand because both are
manifestations of frugality and both are ways of holding down consumption.
section, I turn my attention to the borrowing side of the ledger.

Thus, in thisAs Table 3 shows, Japanranked first among the G7 countries with respect to outstanding liabilities in all four of the years
for which data are shown, with outstanding liabilities ranging from 1.3 to 1.4 times household
disposable income in Japan, as compared to 1.1 to 1.2 times in the United Kingdom, 0.9 to 1.2
times in Canada, 0.9 to 1.1 times in the United States, 0.7 to 1.1 times in Germany, 0.7 to 0.8

12times in France, and 0.3 to 0.4 times in Italy. Moreover, even though conventional wisdom isthat household liabilities consist mostly of mortgages (housing loans) in Japan, the share ofmortgages in household liabilities is much lower in Japan than it is in all of the other G7
countries in all four of the years for which data are shown, ranging from 39 to 45 percent inJapan, as compared to 70 to 73 percent in the United Kingdom, 68 to 76 percent in France, 67 to
70 percent in the United States, 61 to 77 percent in Germany, 61 to 67 percent in Canada, and 47
to 74 percent in Italy (see Table 4).

Thus, in Japan, household debt is used to financeconsumption to a greater extent than it is in the other G7 countries.
Data for the more distant past show that outstanding liabilities were merely 60 and 77
percent of household disposable income in Japan in 1970 and 1980, respectively, indicatingthat the Japanese did, in fact, shun borrowing in the past.

(The data presented in the Andrew

Gordon paper in this volume corroborate my finding that consumer credit did not “take off” inJapan until the late 1980s.)

However, Japanese households now borrow more than consumers

in the other industrialized countries and their household debt is used to finance consumption to agreater extent than in the other industrialized countries.

This dramatic change is presumably

due partly to changes in consumer attitudes and partly to the rapid development of credit
markets in recent years.

Are Japanese Household Portfolios Unusually Conservative?
As Table 4 shows, Japan ranks lowest among the G7 countries with respect to theshare of equities in financial assets in three of the four years for which data are shown (1995,
2000, and 2001).

In 1990, it ranked second from the bottom (ahead of Germany), but thiswas during the bubble period when equity prices were temporarily inflated.

The share ofequities in financial assets has ranged from 7-14 percent in Japan, as compared to 34-46 percent

13

in France, 18-45 percent in Italy, 15-31 percent in the United States, 18-28 percent in Canada,
18-23 percent in the United Kingdom, and 6-27 percent in Germany.
These data confirm that Japanese households are the most conservative in the G7,
investing only a small share of their assets in equities and a correspondingly large share in bankand postal deposits and land/housing.

This conservative portfolio can presumably be

explained in large part by such factors as: (1) the high brokerage fees charged by securities
companies, (2) the large minimum lot sizes when buying and selling equities, (3) consumer
mistrust of securities companies arising from widely publicized scandals involving securities
companies, (4) tax breaks for saving (which applied mostly to bank and postal deposits), (5) thelack of consumer financial education, (6) the high price of land and housing, and (7) a higher
degree of risk aversion in Japan.

The collapse of equity prices in the early 1990s and theircontinued stagnation since then also partially explain the low share of equities in Japan.
Indeed, the decline in the share of equities in financial assets from 14.4 percent in 1990 to 7.1
percent in 2001 is attributable to the collapse and continued stagnation of equity prices.
However, the collapse of the Tokyo stock market cannot be the only explanation of the low
share of equities in Japan because it was already the second lowest among the G7 countries in
1990, even before the collapse of equity prices.

To summarize, the Japanese used to be big savers, but they no longer are.
to rely relatively little on borrowing, but they do now.

They used

The Japanese do, however, continue tohold a high level of assets and to hold conservative portfolios.

II. The Consumption Behavior of the Japanese
To what extent has consumption behavior in Japan changed over time, and how does it

14

compare to that in the other industrialized countries?

Let us examine data on bothconsumption levels and the composition of consumption.11

Are the Japanese Big Spenders?
How do Japanese consumption levels compare to those in the other G7 countries?
Since the figures for each country are expressed in the currency of that country, it is necessary toconvert the figures for each country into a common currency (say, U.S. dollars) when making
inter-country comparisons.

If this is done using market exchange rates, the figures will bebiased to the extent that price levels vary from country to country.

Indeed, because of Japan’shigh price levels, market exchange rates would lead us to conclude erroneously that theJapanese consume at levels far above the average of both the G7 and OECD countries.12

It istherefore preferable to convert the figures for each country to a common currency usingpurchasing power parities, which take account of differences in price levels among countries.
Table 5 presents data on per capita household final consumption expenditure in Japanand the other G7 countries during the 1970-2001 period in U.S. dollars, with the conversion to
U.S. dollars being done using purchasing power parities.

Japanese consumption levels showed

considerable improvement during much of this period but continued to lag far behind thefree-spending Americans and also lagged behind the other G7 and OECD member countries.
Consumption levels in Japan improved sharply from 44.4 percent of U.S. levels in 1970 to 58.4
percent in 1985.

As measured against the G7 average, Japanese consumption levels rose from70.7 percent in 1970 to 87.4 percent in 1985. And relative to the OECD average, Japanese
consumption levels increased from 72.6 percent in 1970 to 92.8 percent in 1985.

However, it

is noteworthy that Japanese consumption levels have not improved relatively since then,remaining at 58-60 percent of U.S. levels, 87-88 percent of the G7 average, and 93-94 percent

15

of the OECD average.

With respect to Japan’s rank among the G7 countries, Japan ranked

seventh (last) in 1970, sixth (ahead of the United Kingdom) in 1985, and sixth (ahead of France)
in 2000 and 2001.
By contrast, the United States stands out as a colossus of consumption throughout thisperiod (see Lizabeth Cohen’s essay in this volume).

Despite expanding consumption in theother G7 countries, no other G7 country managed to consume at more than 69 percent of U.Slevels during the 1970-2001 period.

To be sure, Japanese consumption levels have been at ornear the bottom of the G7 countries, but notwithstanding Japan’s reputation for uniqueness, it is
the United States that jumps off the charts when it comes to consumption.

Are Japanese Consumption Patterns Unique?
Having established that Japan, like the other G7 countries, consumes at levels far
below that of the United States, I now compare the composition of consumption in Japan to thatin the other G7 countries.
The most important indicator of consumption patterns is the so-called Engelcoefficient (defined as the budget share of food and non-alcoholic beverages), and needless tosay, a lower Engel coefficient is indicative of a higher standard of living.

As the(constant-price) data I analyze elsewhere show,13 Japan’s Engel coefficient was very high (55.9
percent) just after the Second World War, but it has shown a phenomenal decline (improvement)
during the postwar period, falling to 45.4 percent in 1955, 35.4 percent in 1965, 27.6 percent in1975, and 22.2 percent in 1985.
Table 6 shows a twelve-way breakdown of the final consumption expenditure ofhouseholds by purpose for the G7 countries for 1990 and 2001, and as this table shows, Japan’s
Engel coefficient declined further to 16.5 percent in 1990 and 14.2 percent in 2001.

16

Thus,

Japan’s Engel coefficient is now only about one-quarter of what it was a half century ago.
Despite this phenomenal improvement, however, Japan’s Engel coefficient was still
the second highest among the G7 countries in both 1990 and 2001.

In 1990, it was 16.5

percent, behind first-place Italy (18.2 percent) but well above the G7 average of 13.4 percent
and the last-place country (the United States) (8.5 percent), and in 2001, it was 14.2 percent,behind first-place Italy (15.1 percent) but well above the G7 average of 11.8 percent and thelast-place country (the United States) (7.1 percent).

Moreover, although Japan’s Engelcoefficient declined somewhat between 1990 and 2001 in absolute terms, it has shown little or
no relative improvement during this time period: the ratio of Japan’s Engel coefficient to the G7
average declined slightly from 1.23 to 1.21 times, but its ratio to the U.S. figure increasedslightly from 1.94 to 2.01 times, and it is now slightly more than twice the U.S. figure.
Turning to a discussion of the other categories of consumption, the most unusual
features of consumption patterns in Japan (aside from the high Engel coefficient) are therelatively low shares of “transport,” “furnishings, household equipment and routine
maintenance of the house,” and “health” in both 1990 and 2001, the relatively low share of“restaurants and hotels” in 1990, the relatively low share of “clothing and footwear” in 2001,
the relatively high share of “recreation and culture” in both 1990 and 2001, and the relatively
high share of “housing, water, electricity, gas and other fuels” in 2001 (see Table 6).
Japan’s consumption patterns look more “backward” than those of the other G7
countries at first glance inasmuch as the budget shares of necessities such as food and housing
are relatively high and the budget shares of luxuries such as transport, furnishings/household
equipment/etc., health, and restaurants/hotels are relatively low (the main exceptions being thatthe budget share of clothing (a necessity) is relatively low and that the budget share ofrecreation/culture (a luxury) is relatively high).

17

However, Japan’s consumption patterns areheavily influenced by factors other than income levels.

For example, Japan’s high Engelcoefficient is due in large part to the much higher food prices in Japan, which in turn are due tothe scarcity of arable land, government regulation of food prices, and restrictions on foodimports.

Similarly, the high budget share of housing in Japan is due in large part to high rents,

which, in turn, are due in large part to the scarcity of land; the low budget share of transport isdue in large part to the low automobile ownership rate, which, in turn, is due in large part tohigh gasoline prices, high expressway tolls, high parking fees, and the availability of public
transportation; and the low budget share of health in Japan is due in large part to a presence of auniversal national health insurance program.

To summarize, Japan showed phenomenal improvement in consumption levels andconsumption patterns during the postwar period, and as a result, its consumption levels andconsumption patterns are now roughly comparable to those of the other G7 countries but are
still well behind those of the United States.

Conclusions
This chapter has analyzed the saving and consumption behavior of the Japanese,
examining trends over time as well as comparisons with the other industrialized countries(mostly the Group of Seven countries).
and consumption behavior correct?
period one is discussing.

Are the conventional wisdoms about Japanese saving

Yes and no, depending on which behavior and which

The Japanese were big savers during parts of the prewar, wartime,and early postwar periods and throughout the 1955-95 period but not any longer, andhousehold saving rates can be expected to decline even further in the future.
used to shun borrowing but not any longer.

The Japanese did

The Japanese are still wealthy despite the decline18

in equity and land prices, and the Japanese do continue to hold conservative portfolios.

Finally,although the Japanese steadily increased their consumption levels during the postwar period,
they still do not consume quite as much as most other G7 countries and far less than Americans,and although the consumption patterns of the Japanese improved dramatically during thepostwar period, Japan’s consumption patterns are still not quite as affluent as those of mostother G7 countries and far less affluent than those of the United States.
.

.

Are the Japanese unique?

No, the saving and consumption behavior of the Japaneseis admittedly quite different from that of the Anglo-Saxon countries (Canada, the United
Kingdom, and the United States), which have low household saving rates, low net wealth, lowreal assets, high consumption levels, and low Engel coefficients.

However, Japanese saving

and consumption behavior is surprisingly similar to that of the continental European
countries--France, Germany, and especially Italy, all of which exhibit a high household saving
rate, high net worth, high real assets, low consumption levels, and high Engel coefficients.

Onthe other hand, Japan (and Germany) more closely resemble the Anglo-Saxon countries withrespect to high levels of both financial assets and liabilities.

With respect to total assets andequity shares, there appear to be no systematic differences between Continental Europe/Japanand the Anglo-Saxon countries.

Interestingly, Italy fits the conventional wisdoms about Japan

more closely than Japan itself.

Italy not only has a high household saving rate, high net worth,and high real assets but its household saving rate has historically surpassed even Japan’s, its real
assets today exceed those of Japan, and it has low liabilities, unlike Japan.
An analysis of the striking differences in saving and consumption behavior between
Continental Europe/Japan and the Anglo-Saxon countries awaits another paper.

However, one

explanation may be that high land/housing prices--combined with capital market imperfections
and a strong desire for homeownership--in Continental Europe/Japan led to the high household

19

saving rates, high net wealth, high real assets, low financial assets, and low liabilities in thesecountries.14

In any event, all too often, scholars compare Japan only to the United States, butsuch narrow comparisons create the false impression that Japan is unique.

We should bear inmind that Japan and Continental Europe are quite similar in many ways and avoid exaggerating
the distinctiveness of Japan.

When it comes to saving and consumption, it is American

exceptionalism (together with that of Canada and the United Kingdom) that demands further
study.

20

Figure 1: Trends in Japan's Household Saving Rate, 1955-2002
25.0

20.0

15.0
SNA68
SNA93
10.0

5.0

20
01

19
99

19
97

19
95

19
91
19
93

19
89

19
87

19
85

19
83

19
79
19
81

19
77

19
75

19
73

19
71

19
67
19
69

19
65

19
63

19
61

19
59

19
57

19
55

0.0

Calendar Year

Notes: The line marked “SNA68” shows data based on the United Nations’ System of National
Accounts 1968, whereas the line marked “SNA93” shows data based on the United Nations’
System of National Accounts 1993. Payments in kind for medical and other services fromsocial insurance have been added to the denominator of the SNA93 figures to make themcomparable to the SNA68 figures.

Source: Department of National Accounts, Economic and Social Research Institute, Cabinet
Office, Government of Japan, ed., Annual Report on National Accounts, 2004 edition (Tokyo:
National Printing Bureau, 2004), and earlier editions of the same.

21

Data for Figure 1: Trends in Japan's Household
Saving Rate, 1955-2002
Calendar Year
SNA68
SNA93
1955
11.9
1956
12.9
1957
12.6
1958
12.3
1959
13.7
1960
14.5
1961
15.9
1962
15.6
1963
14.9
1964
15.4
1965
15.8
1966
15.0
1967
14.1
1968
16.9
1969
17.1
1970
17.7
1971
17.8
1972
18.2
1973
20.4
1974
23.2
1975
22.8
1976
23.2
1977
21.8
1978
20.8
1979
18.2
1980
17.9
15.4
1981
18.4
16.2
1982
16.7
14.9
1983
16.1
14.3
1984
15.8
14.3
1985
15.6
13.7
1986
15.6
13.0
1987
13.8
11.5
1988
13.0
11.9
1989
12.9
12.0
1990
12.1
12.3
1991
13.2
13.3
1992
13.1
12.5
1993
13.4
12.0
1994
13.3
11.1
1995
13.7
10.4
1996
13.4
8.5
1997
12.6
8.6
1998
13.4
9.6
1999
9.2
2000
8.2
2001
5.6
2002
5.4

22

Table 1: Net Household Saving Rates of Selected OECD Countries, 1985-2002
1985
1990
1995
2000
2002
Australia
10.8
7
9.3
9
4.8 17T
3.4 16T
0.6
19
Austria
10.5
8
14.0
4T
11.7
7
8.3
8
7.6
8T
11.1
6
12.1
8
13.2
5
9.2
7
10.1
5
*Belgium
Canada
15.8
3
13.0
7
9.2 12
4.6 15
4.2
16
Czech Rep.
na
na
20.6
1
13.0
1
11.3
2
na
7.8 11T
4.8 17T
3.4 16T
5.0
15*Denmark
Finland
3.4 141.8
16
4.8 17T-1.4 20-1.4
20France8.9 10
7.8 11T
11.2
9T
11.0
3
12.0
1
12.1
5
13.7
6
11.2
9T
9.8
5T
10.6
4
Germany
21.5
1
19.5
2
15.8
3
10.1
4
11.1
3
*Italy
Japan
16.5
2
14.0
4T
11.9
6
9.8
5T
5.9
13
South Korea
14.8
4
22.0
1
16.8
2
11.5
2
7.6
8T
Netherlands
5.6 13
17.5
3
14.4
4
6.8 11
8.6
6
New Zealand
1.3 160.7
18-3.8 21-4.1 21-5.2
21-3.3 171.5
17
4.6 20
4.5 13
6.9
11
Norway*Portugalnana
9.5 11
7.6
9T
8.5
7*Spain7.8 11
8.6
10
11.3
8
7.6
9T
7.4
10
*Sweden
2.2 150.0
19
5.8 15
1.7 19
5.7
14*Switzerland
na
6.1
14
6.6 14
5.8 126.8
12
6.9 12
5.6
15
7.0 13
3.9 14
3.7 17T*United Kingdom
United States
9.2
9
7.8 11T
5.6 16
2.8 183.7 17T
OECD Mean
9.1
9.6
9.4
6.2
6.2
Notes: The left-hand figures denote the household saving rate, defined as household saving
as a ratio of disposable household income, while the right-hand figures denote the rank ofeach country. "na" denotes "not available," while "T" denotes "tie." The first figure for New
Zealand is the figure for 1986 because the figure for 1985 was not available. The figures
include the saving of households as well as that of non-profit institutions except in the caseof the Czech Republic, Finland, France, Japan, and New Zealand. For countries marked byan asterisk, only figures on gross household saving rates were available, and the gross figures
were converted to a net basis by using a conversion factor of 0.7 (which is the approximate
ratio of the average net household saving rate to the average gross household saving rate forthe countries and years used in the present analysis).
Source: OECD Economic Outlook , vol. 2003/1, no. 73 (June 2003); vol. 2003/2, no. 74(December 2003), Annex Table 24.

23

Table 1A: Household Saving Rates of Selected OECD Countries, 1985-2002
1985
1990
1995
2000
2002
Net Household Saving Rate
Australia
10.8
5
9.3
7
4.8 10T
3.4 100.6
Austria
10.5
6
14.0
3T
11.7
5
8.3
6
7.6
Canada
15.8
2
13.0
6
9.2
8
4.6
8
4.2
Czech Rep.
na
na
20.6
1
13.0
1
11.3
Finland
3.4 101.8 10
4.8 10T-1.4 12-1.4
France
8.9
8
7.8
8T
11.2
6T
11.0
3
12.0
Germany
12.1
4
13.7
5
11.2
6T
9.8
4T
10.6
Japan
16.5
1
14.0
3T
11.9
4
9.8
4T
5.9
South Korea
14.8
3
22.0
1
16.8
2
11.5
2
7.6
Netherlands
5.6
9
17.5
2
14.4
3
6.8
7
8.6
New Zealand
1.3 11
0.7 12-3.8 13-4.1 13-5.2
Norway-3.3 12
1.5 11
4.6 12
4.5
9
6.9
United States
9.2
7
7.8
8T
5.6
9
2.8 11
3.7
OECD Mean
8.8
10.3
9.5
6.2
5.6
Gross Household Saving Rate
Belgium
15.9
2
17.3
2
18.8
2
13.2
2
14.4
Denmark
na
11.2
4
6.9
8
4.8
7
7.2
Italy
30.7
1
27.8
1
22.5
1
14.4
1
15.9
Portugal
na
na
13.6
4
10.9
3
12.1
Spain
11.1
3
12.3
3
16.2
3
10.8
4
10.6
Sweden
3.2
5
0.0
7
8.3
7
2.4
8
8.2
Switzerland
na
8.7
5
9.4
6
8.3
5
9.7
United Kingdom
9.8
4
8.0
6
10.0
5
5.5
6
5.3
OECD Mean
14.1
12.2
13.2
8.8
10.4
Notes: See Table 1.
Source: The same as Table 1.

24

11
5T
9
2
12
1
3
8
5T
4
13
7
10

2
7
1
3
4
6
5
8

Table 2: Share of the Aged Population in Selected OECD Countries, 1975-2025
1975
2000
2025
Country
Australia
8.7
17T
12.3
18T
18.6
18
Austria
14.9
2
15.6
10T
24.3
7
Belgium
13.9
5
17.0
4T
23.7
8
Canada
8.5
19
12.6
17
20.7
16T
Czech Rep.
12.9
9
13.8
15
23.1
10
Denmark
13.4
8
15.0
13
22.5
11
Finland
10.6
13
14.9
14
25.2
5
France
13.5
7
16.0
7T
22.2
12
Germany
14.8
3
16.4
6
24.6
6
Italy
12.0
11
18.1
1
25.7
3
Japan
7.9
20
17.2
3
28.9
1
South Korea
3.6
21
7.1
21
16.9
21
Netherlands
10.8
12
13.6
16
21.9
13T
New Zealand
8.7
17T
11.7
20
18.5
19T
Norway
13.7
6
15.4
12
21.8
15
Portugal
9.9
16
15.6
10T
20.7
16T
Spain
10.0
15
17.0
4T
23.6
9
Sweden
15.1
1
17.4
2
25.4
4
Switzerland
12.6
10
16.0
7T
27.1
2
United Kingdom
14.0
4
15.8
9
21.9
13T
United States
10.5
14
12.3
18T
18.5
19T
OECD Mean
11.4
14.8
22.7
Notes: The left-hand figures denote the share of the population aged 65 or older to thetotal population, while the right-hand figures denote the rank of each country. "na"denotes "not available," while "T" denotes "tie."
Source: United Nations, World Population Ageing, 1950-2050 (New York, N.Y.:
United Nations, 2002).

25

Table 3: Household Wealth and Indebtedness in the Group of Seven Countries, 1990-2001
1990
1995
2000
2001
Country
Canada7
Net wealth
416.5
7
483.7
7
506.7
7
507.4
6
Net financial wealth
177.5
5
225.7
4
244.1
6
238.1
6
Non-financial assets
239.0
6
258.0
6
262.6
6
269.3
4
Financial assets
270.4
4
329.1
4
357.1
5
353.2
of which: Equities
49.6
5
4
66.3
4
94.4
5
98.6
Total assets
509.4
7
587.1
6
619.7
7
622.5
6
Liabilities
92.9
3
3
103.4
3
113.0
4
115.2
of which: Mortgages
59.2
3
4
68.8
2
69.8
4
69.9
France4
Net wealth
541.8
4
507.6
6
629.3
4
613.6
4
Net financial wealth
169.6
6
195.0
6
282.6
5
255.1
4
Non-financial assets
372.2
5
312.6
4
346.7
5
358.6
5
Financial assets
248.3
5
262.9
5
359.2
4
336.7
of which: Equities
114.1
1
1
89.6
2
155.7
1
129.8
Total assets
620.5
4
575.5
7
705.9
4
695.3
4
Liabilities
78.7
5
6
67.9
6
76.6
6
81.7
of which: Long-term loans
53.4
5
6
51.6
6
55.2
6
55.6
Germany
5
Net wealth
535.6
5
563.1
3
583.9
6
568.5
7
Net financial wealth
130.8
7
135.6
7
162.9
7
159.0
5
Non-financial assets
404.8
3
360.6
3
351.0
4
340.4
7
Financial assets
200.7
7
236.2
7
277.3
7
270.9
of which: Equities
11.6
7
6
42.3
7
74.8
6
67.8
Total assets
605.5
5
596.8
5
628.3
6
611.3
7
Liabilities
70.0
6
4
100.6
4
114.4
3
112.0
of which: Mortgages
53.6
4
3
61.0
4
72.5
2
72.1
Italy
2
Net wealth
636.9
2
699.3
2
748.3
3
714.2
5
Net financial wealth
196.3
4
224.0
5
294.6
4
251.7
1
Non-financial assets
440.5
2
475.3
1
453.7
1
462.5
6
Financial assets
225.4
6
254.6
6
329.8
6
287.0
of which: Equities
46.0
6
3
46.5
5
147.4
3
102.5
Total assets
665.9
3
729.9
2
783.5
3
749.5
3
Liabilities
29.1
7
7
30.6
7
35.3
7
35.3
of which: Medium and
18.6
7
25.7
7
26.0
long-term loans
13.7
7
7
Japan
1
Net wealth
947.6
1
757.1
1
762.3
1
753.1
1
Net financial wealth
268.0
1
289.1
2
344.0
3
344.7
2
Non-financial assets
679.6
1
468.0
2
419.3
2
408.4
1
Financial assets
398.8
1
426.2
1
477.7
2
483.5
of which: Equities
57.3
3
7
45.9
6
42.8
7
34.4
Total assets
1078.4
1
894.2
1
897.0
1
891.9
1
Liabilities
130.8
1
1
137.1
1
133.7
1
138.8
of which: Mortgages
50.6
6
5
58.5
5
59.3
5
61.9
(continued)

26

Table 3 (continued)
United Kingdom
Net wealthNet financial wealthNon-financial assets
Financial assetsof which: Equities
Total assets
Liabilitiesof which: Mortgages
United States
Net wealthNet financial wealthNon-financial assets
Financial assetsof which: Equities
Total assets
Liabilitiesof which: Mortgages

611.0
214.1
396.9
329.9
61.2
726.8
115.8
81.3

3
3
4
3
2
2
2
1

555.9
281.3
270.2
387.8
71.7
658.0
106.5
78.1

4
3
5
3
3
3
2
1

748.8
377.5
370.9
493.1
110.9
863.9
115.6
83.5

2
1
3
1
4
2
2
1

682.3
314.4
370.2
433.1
78.8
803.4
118.7
85.7

3
3
3
3
5
2
2
1

474.5
259.0
215.5
345.6
52.1
561.1
86.6
60.3

6
2
7
2
4
6
4
2

508.2
304.5
203.7
398.3
97.7
601.9
93.7
63.5

5
1
7
2
1
4
5
3

587.4
370.3
217.1
475.2
147.6
692.3
104.9
70.5

5
2
7
3
2
5
5
3

555.6
330.3
225.4
439.1
122.5
664.5
108.9
74.5

6
2
7
2
2
5
5
2

Notes: The left-hand figures denote assets and liabilities outstanding at the end of the year as apercent of nominal disposable income, while the right-hand figures denote the rank of eachcountry. Most figures are based on the UN System of National Accounts 1993 (SNA93) and,more specifically, for European Union countries, on the corresponding European System of
Accounts 1995 (ESA95).
Households include non-profit institutions serving households. Net wealth is defined as nonfinancial and financial assets minus liabilities; net financial wealth is financial assets minus
liabilities. Non-financial assets include stock of durable goods and dwellings, at replacement costand at market value, respectively. Financial assets comprise currency and deposits, securities
other than shares, loans, shares and other equity, insurance technical reserves; and other accounts
receivable/payable. Not included are assets with regard to social security pension insurance
schemes. Equities comprise shares and other equity, including quoted, unquoted and mutual fundshares. See also OECD Economic Outlook Sources and Methods(http://www.oecd.org/eco/sources-and-methods).
Primary sources: Banque de France, Flow of Funds Accounts. Germany: Deutsche Bundesbank,Monthly Report and Financial accounts for Germany 1991 to 1999, Special Statistical
Publication, 2000. Italy: Banca d'Italia, Supplements to the Statistical Bulletin ; Ando, A.,
L.Guiso, I.Visco (eds.), Saving and the Accumulation of Wealth, Cambridge University Press,
1994; OECD, Financial Accounts of OECD countries . Japan: Economic Planning Agency,
Government of Japan, Annual Report on National Accounts. United Kingdom: Office for
National Statistics, United Kingdom National Accounts, and Financial Statistics. UnitedStates: Federal Reserve Statistical Release, Flow of Funds Accounts of the United States.
Source： OECD Economic Outlook , vol. 2003/1, no. 73 (June 2003); vol. 2003/2, no. 74(December 2003), Annex Table 56.

27

Table 4: Share of Equities in Financial Assets and Share of Mortgages in Liabilities in theGroup of Seven Countries, 1990-2001
Country
1990
1995
2000
2001
CanadaShare of equities in
18.3
4
20.1
3
26.4
5
27.9
3T
financial assets
Share of mortgages in
63.7
5
66.6
4
61.8
6
60.7
6
liabilities
FranceShare of equities in
34.1
1
43.3
2
38.6
financial assets
46.0
1
1
Share of long-term loans in
75.9
1
72.1
3
68.1
liabilities
67.9
4
4
Germany
Share of equities in
17.9
6
27.0
4
25.0
financial assets
5.8
7
5Share of mortgages in
60.6
6
63.3
5
64.4
liabilities
76.6
1
5
Italy
Share of equities in
20.4
2
18.3
5
44.7
1
35.7
2
financial assets
Share of medium- and
60.7
5
72.8
1
73.7
long-term loans in
47.1
6
1
Japan
Share of equities in
10.8
7
9.0
7
7.1
financial assets
14.4
6
7
Share of mortgages in
42.7
7
44.4
7
44.6
liabilities
38.7
7
7
United Kingdom
Share of equities in
18.5
4
22.5
6
18.2
financial assets
18.6
36
Share of mortgages in
73.3
2
72.3
2
72.2
liabilities
70.2
22
United States
Share of equities in
24.5
2
31.1
3
27.9
financial assets
15.1
5
3T
Share of mortgages in
67.8
3
67.2
4
68.4
liabilities
69.6
3
3
Notes: The right-hand figures indicate the rank of each country.
Source: Table 3.

28

Country
CanadaFranceGermany
Italy
Japan
United Kingdom
United States
Group of Seven MeanOECD Mean

Table 5: Consumption Levels in the Group of Seven Countries, 1970-2001
1970
1985
2000
2,041
64.51
2
7,720
67.88
2
15,209
62.67
3
1,943
61.41
3
7,183
63.16
3
13,392
55.19
7
1,730
54.68
5
6,823
59.99
5
14,829
61.11
5
1,711
54.08
6
6,827
60.03
4
15,031
61.94
4
1,405
44.41
7
6,640
58.38
6
14,248
58.71
6
1,908
60.30
4
6,637
58.36
7
15,944
65.70
2
3,164
100.001
11,373100.001
24,267100.00
1
1,986
7,600
16,131
1,935
7,155
15,234

15,93914,245
15,13915,627
14,56916,74524,438
16,672
15,656

2001
65.22
58.29
61.95
63.95
59.62
68.52
100.00Notes: The left-hand figures show per capita household final consumption expenditure at current prices and current purchasing power parities(U.S. dollars), the middle figures show the ratio of the left-hand figure to the figure for the United States, and the right-hand figures show therank of each country. The OECD means exclude the Czech Republic, Hungary, Poland, and the Slovak Republic.
Source: Organization for Economic Cooperation and Development, National Accounts of OECD Countries , Volume 1, 1990-2001: Main
Aggregates (Paris: OECD, 2003), pp. 346-347.

29

3
7
5
4
6
2
1

Table 6: Household Final Consumption Expenditure by Purpose for the Group of Seven Countries, 1990 and 2001
Purpose of consumption
Canada France Germany
Italy
Japan
UK
US
G7
1990
Food and non-alcoholic beverages
Alcoholic beverages, tobacco and narcotics
Clothing and footwear
Housing, water, electricity, gas and other fuels
Furnishings, household equipment and routine
maintenance of the house
HealthTransport
Communications
Recreation and culture
Education
Restaurants and hotels
Miscellaneous goods and services
2001
Food and non-alcoholic beverages
Alcoholic beverages, tobacco and narcotics
Clothing and footwear
Housing, water, electricity, gas and other fuels
Furnishings, household equipment and routine
maintenance of the house
HealthTransport
Communications
Recreation and culture
Education
Restaurants and hotels
Miscellaneous goods and services

10.93
4.53
6.49
24.86

14.95
3.54
6.27
22.48

12.94
4.15
7.50
22.12

18.25
3.06
9.69
18.87

16.46
3.27
7.94
21.62

11.41
4.96
5.22
18.68

8.48
2.44
5.15
18.47

13.35
3.71
6.89
21.01

6.90
3.69
14.82
1.66
9.32
0.72
8.22
7.85

6.71
3.16
15.53
1.57
8.18
0.65
7.78
9.18

7.74
3.02
15.69
1.67
9.51
0.77
5.81
9.09

9.67
2.06
12.28
1.54
7.40
1.01
8.60
7.57

4.83
3.27
10.98
1.13
11.31
2.44
6.38
10.38

5.33
1.61
15.25
1.59
9.92
1.11
12.56
12.35

4.99
16.58
11.26
1.61
7.30
2.36
6.57
14.80

6.60
4.77
13.69
1.54
8.99
1.29
7.99
10.17

9.92
3.39
5.73
23.91

13.74
2.99
5.06
23.09

12.31
3.81
6.67
23.55

15.15
2.36
9.49
17.93

14.25
2.94
5.06
24.15

10.27
3.81
7.31
16.09

7.09
1.70
6.03
15.97

11.82
3.00
6.48
20.67

6.70
4.28
14.63
2.22
11.27
1.14
7.55
9.27

6.22
7.41
3.70
3.93
14.84
13.90
3.52
3.27
9.61
9.77
0.61
0.65
7.22
4.97
9.40
9.77
(continued)

9.48
2.80
12.36
3.94
8.19
0.98
9.42
7.89

4.92
3.55
10.32
3.76
12.43
1.94
7.08
9.62

6.41
1.25
14.39
3.09
14.93
1.19
10.21
11.06

5.53
15.92
11.28
2.44
10.59
2.15
6.07
15.23

6.67
5.06
13.10
3.18
10.97
1.24
7.50
10.32

30

Table 6 (continued)
Notes: The figures show consumption for each purpose as a share of the final consumption
expenditure of households in the economic territory, both at 1995 prices. The figures for Germany
are for 1991 instead of 1990 and for 2000 instead of 2001 because figures for 1990 and 2001 are notavailable, and the figures for the United States are for 2000 instead of 2001 because figures for 2001
are not available.
Sources: Organization for Economic Cooperation and Development, National Accounts of OECDCountries , Volume II, 1989-2001: Detailed Tables (Paris: OECD, 2002). The 2001 figures forJapan are from the same source as Figure 1.

31Endnotes
1

In one government survey, 61.4 percent of the respondents agreed with the statement: “TheJapanese are said to be frugal and saving-lovers, and I think this is a good thing.”

See Kenichi

Tominaga and Takao Mamada, Nihonjin no Chochiku: Koudou to Ishiki (The Saving of theJapanese: Behavior and Attitudes) (Tokyo: Nihon Hyouronsha, 1995) (in Japanese).
2Charles Yuji Horioka, “Consuming and Saving,” in Andrew Gordon, ed., Postwar Japan as

History (Berkeley: University of California Press, 1993), 259-92.

3

The second major difference between the two series is that the series based on SNA68

includes payments in kind for medical and other services from social insurance (i.e., the portionof the cost of medical and other services covered by social insurance) in household disposable
income and consumption whereas the series based on SNA93 does not.

In order to make thetwo series as comparable as possible, the author added payments in kind for medical and otherservices from social insurance to household disposable income when computing the householdsaving rate from the data based on SNA93.

4

The discrepancy between the National Accounts data based on SNA93 and OECD data on

Japan’s household saving rate is due primarily to the treatment of payments in kind for medical
and other services from social insurance (see footnote 3 above for details).

5See, for example, Fumio Hayashi, “Why Is Japan’s Saving Rate So Apparently High?” inStanley Fischer, ed., NBER Macroeconomics Annual 1986, vol. 1 (Cambridge, Massachusetts:
MIT Press, 1986), 147-210, and Charles Yuji Horioka, “Is Japan's Household Saving Rate
Really High?” Review of Income and Wealth, series 41, no. 4 (December 1995):373-397.

32

6Charles Yuji Horioka, “Why Is Japan's Household Saving Rate So High?

A Literature

Survey,” Journal of the Japanese and International Economies 4, no. 1 (March 1990):49-92.
See also Hayashi, “Why Is Japan’s Saving Rate So Apparently High?” 147-210.

7

For an exposition of the life cycle hypothesis, see, for example, Franco Modigliani andRichard Brumberg, “Utility Analysis and the Consumption Function:

An Interpretation of

Cross-Section Data,” in K. K. Kurihara, ed., Post-Keynesian Economics (New Brunswick, N.J.:
Rutgers University Press), 388-436.
8

Sheldon Garon, Molding Japanese Minds: The State in Everyday Life (Princeton, N.J.:

Princeton University Press, 1997).
9 See Charles Yuji Horioka, “Future Trends in Japan's Saving Rate and the Implications Thereof

for Japan's External Imbalance,” Japan and the World Economy 3, no. 4 (April 1992):307-30,
for a survey of the evidence.

Also see Charles Yuji Horioka, “Saving in Japan,” in Arnold

Heertje, ed., World Savings: An International Survey (Oxford, UK: Blackwell Publishers, 1993),
238-78, and Charles Yuji Horioka, “Are the Japanese Selfish, Altruistic, or Dynastic?” Japanese
Economic Review 53, no. 1 (March 2002):26-54, for evidence on whether the life cycle
hypothesis applies in the case of Japan.

10Charles Yuji Horioka, “The Stagnation of Household Consumption in Japan,” in Michael

Hutchison and Frank Westermann, eds., Economic Stagnation in Japan (Cambridge,
Massachusetts: MIT Press, forthcoming).

11 See Horioka, “Consuming and Saving,” and Charles Yuji Horioka, “Japan's Consumption and

Saving in International Perspective,” Economic Development and Cultural Change 42, no. 2

33

(January 1994):293-316, for data on more countries and over a longer time period.

12

If market exchange rates are used to convert the figures for each country to U.S. dollars,consumption levels in Japan in 2001 were 73.5 percent of U.S. levels (as opposed to 59.6
percent when purchasing power parities are used to make the conversion), 118.5 percent of theG7 average (as opposed to 87.4 percent), and 125.0 percent of the OECD average (as opposed
to 93.1 percent).

13 Horioka, “Consuming and Saving,” Tables 10-2 and 10-4.

14 Note that the last two do not apply in present-day Japan.

Eisuke Sakakibara and Robert A.

Feldman, “The Japanese Financial System in Comparative Perspective,” Journal ofComparative Economics 7, no. 1 (March 1983):1-24, discuss the differences in the financial
market structures of Japan and the United States and argue that these differences (such as the far
more intense competition for deposits among private financial institutions and the postal savings
system in Japan) can help explain differences in household behavior.

34