Development Bank of Japan
Research Report
No. 4

Destabilized Consumption and the Post-bubble
Consumer Environment

February 2000

Economic and Industrial Research Department
Development Bank of Japan

Contents
Summary ............................................................................................................................. iii
I.

Responsiveness of Consumption to Business Conditions ............................................ 1
1. Contribution of Household Demand to Economic Growth ................................................ 1
2. Destabilization of Personal Consumption................................................................................ 3
3. Destabilizing Factors as Reflected in Consumption Structure ............................................. 5

II. Impact of Income and Employment Conditions on Consumption in
the Post-bubble Period...................................................................................................8
1. Changes in Household Income Conditions ............................................................................. 8
2. Changes in Consumption Propensity According to Permanent Income Hypothesis .....10
III. Impact of Post-bubble Balance Sheet on Consumption ............................................. 14
1. Changes in Balance Sheet of Household Sector....................................................................14
2. Impact of Debt Deflation and Housing Loan Repayments ................................................16
3. Impact of Capital Losses Due to Asset Deflation.................................................................20
IV. Changes in Future Perspective of Consumers............................................................ 23[Appendix] Estimate of Human Assets.............................................................................. 27
References........................................................................................................................... 31

Development Bank of Japan Research Report/ No. 4iDestabilized Consumption and the Post-bubble Consumer
Environment

Summary
1. Demand in the household sector experienced the sharpest decline in FY1997, seven years
after the collapse of the bubble economy. In particular, personal consumption, which constitutes
the core of household demand, recorded negative growth for the first time since the war.
Despite some signs of recovery for durable goods in FY1998, private consumption as a whole
has remained sluggish, without clear prospects for recovery so far in FY1999.
This report discusses the characteristics of sluggish consumption since FY1997 with special focus
on the following two questions:(i) Has personal consumption become so destabilized over the long term that the structureof consumption itself has become responsive to the business cycle?
(ii) Does the consumer environment after the collapse of the bubble economy represent apeculiar feature that has not been observed before (in terms of income/employment,balance sheet and future prospects)?
This report examines the prospects for consumption-led recovery of the Japanese economy
and its implications.
2. In household demand in FY1997, the only positive contribution was fictitious consumption(i.e., imputed rent of owned houses and medical expenses paid by social security), which is not
actual consumption in any sense. Service consumption (excluding fictitious consumption), which
had remained steady during the previous recessions, also seemed to have fallen. Elsewhere,
durables consumption and housing investment, partly due to the after-effects of last-minutedemand prior to the consumption tax hike, made negative contributions as in FY1974 and 1980,
when domestic demand dropped significantly. Although durables consumption recovered slightly
in FY1998, housing investment and service consumption (excluding fictitious consumption)
appear to have continued their decline. Household demand is thus slowing down dramatically.
3. Traditionally, household demand (personal consumption in particular) has been consideredstable regardless of the business cycle. Nonetheless, the cyclical fluctuation of personal
consumption, if the long-term trend component is excluded, is greater during stable growth (suchas after the first oil crisis) than during rapid growth (such as before the first oil crisis). Moreover,within periods of stable growth, the fluctuation has grown in magnitude over the years, from the1970s through the 1990s. During recessions, the fluctuation in the 1990s is particularly significant.
As personal consumption has become unstable in the long term, consumption is less likely toplay a supporting role in times of recession.
4.

The long-term destabilization of personal consumption can be attributed to the increased
Development Bank of Japan Research Report/ No. 4iii

weight in total consumption of optional expenditures, which respond to the business cycle (i.e.,the share in total consumption expenditure of the items whose expenditure elasticity exceeds 1).
The following developments have been identified:(i) The weight of optional consumption in two or more person households has increased
by about 10% in the 35 years since the beginning of the current Family Income andExpenditure Survey, remaining throughout the 1990s at the level recorded during the bubble
years (32.6% in 1963, 44.2% in 1989, 44.9% in 1996 and 44.1% in 1998).
(ii) The weight of optional consumption in one-person households has declined from the
bubble period, although it is still higher than in two or more person households (48.8% in
1989, 47.7% in 1996 and 44.7% in 1998).
(iii) The weight of service consumption has been increasing within the optional
consumption expenditure.
The increasing weight of optional consumption reflects the improvement in living standards,
but also indicates that the structure of consumption is becoming increasingly responsive to thebusiness cycle. The expected increase in one-person households, with relatively higher weight ofoptional consumption, will necessarily lead to further structural destabilization of consumption.
5. The post-bubble income environment indicates that the growth of real disposable income
has slowed since FY1992, becoming negative in FY1997 for the first time in the post-war period.
Real compensation of employees in particular deteriorated further in FY1998. The trend of percapita income reflects the reduction in overtime pay, bonus and special earnings (accounting for
30% of total income), the slowing growth of regular wage and salary (70% of the total) and thefirst decrease in employees since the war. Therefore, consumers are perhaps beginning toconsider the drop in income not as a temporary phenomenon but as a permanent trend. Using a
consumption function based on the permanent income hypothesis, we compared short-term andlong-term marginal consumption propensity according to SNA statistics between the bubble
economy and the post-bubble period. The result indicates that marginal consumption propensity
remained almost unchanged in the long term but increased in the short term. In other words,
consumers in the post-bubble period increasingly consider the current change in income as achange in permanent income. The higher marginal propensity to consume in the short time may
thus destabilize overall consumption.
6. The post-bubble balance sheet in the household sector has been suffering from capital losses
induced by asset deflation. The unrealized capital gains of assets (including land and other nonreproducible tangible assets and equity) have been declining for seven years since the peak at theend of 1990. In contrast, liabilities remain at a high level. As disposable income stagnates, theliability-disposable income ratio in the pure household sector (excluding proprietorship) has beenover 100% since FY1994, and at the same time, the housing loan-disposable income ratio has
also been rising. This trend is much clearer when samples are limited to the households withhousing or land loans. Based on an investigation of the changes both in income and in liabilities,
as well as the trend of the liability-income ratio, the burden of liabilities is expected to have been
particularly heavy for workers’ households that acquired housing in the 1990s.
7. We investigated the impact of the change in the balance sheet, both debt deflation and asset
deflation, on household consumption and saving behavior.
(1) Workers’ households with housing loan repayments (about 30% of the total) show asteeper decline in consumption than households without housing loan repayments. The
saving rate is higher in the former households to compensate for the higher loaniv

Development Bank of Japan Research Report/ No. 4

repayments. Especially since 1993, loan repayments have contributed to a rise in the saving
rate.
(2) The consumption function based on the life-cycle hypothesis showed that the capitalgains/losses in assets affected consumption. We estimated two cases using both capitalgains/losses accrued in the current period, and accumulated capital gains defining 1969 as
the base year, for the term between 1971 and 1997. In both cases, the coefficients
representing the effect of capital gains/losses proved to be significant, however, when theestimation was performed separately for non-financial assets and net financial assets, thecoefficient was significant only for the former. The closest fit was the case using
accumulated capital gains on net assets. This implies that the accumulated capital loss or the
reduction in accumulated capital gains has a negative impact on consumption.
8. Present living conditions and public perception on present livelihood did not deteriorate
considerably after the collapse of the bubble economy until 1997. However, short-term
consumer confidence in 1998 almost dropped as low as that just after the first oil crisis, partly
due to the large-scale bankruptcies in the banking sector since November 1997. Prospects forincome growth, employment conditions and asset value dropped to record-low levels, and havenot shown signs of recovery. In any previous recession, public perception of future livelihood
always showed some expectation that living standards would improve. For this two years since
1996, however, this has not been the case.
Of greatest concern is the fact that the prospects for Japan’s economic direction and life
after retirement continued to deteriorate during the 1990s. This was due to concerns about thedeteriorating financial status of the government caused by successive economic stimulus
packages of the post-bubble period. Consumers have also been concerned about uncertainty
regarding pensions, health care and nursing care in the aging society with a falling birthrate. As aresult, consumer confidence has become sensitive to long-term economic prospects.
In order to restore consumption so that it leads the economy, the economic situation, which
has been exerting downward pressure on consumption since the collapse of the bubble economy,
must be improved urgently, rather than taking repeated temporary countermeasures, sinceconsumption has become more sensitive to business conditions. One solution is to reassure thepublic that problems such as the aging society and falling birth rate, as well as stabilization ofincome and employment conditions will eventually be solved, and to restore the confidence ofconsumers in their future.

Development Bank of Japan Research Report/ No. 4v

I. Responsiveness of Consumption to Business Conditions
1. Contribution of Household Demand to Economic GrowthThis section first confirms the fact that demand in the household sector (personal consumption
and housing investment) is in a long-term slump, recording the sharpest decline in the post-war
era in FY1997, seven years after the collapse of the bubble economy.
According to SNA statistics, Figure 1-1 shows the contribution of household demand to thegrowth of real domestic demand in long-term chronological order from 1956 through 1998. The
following three characteristics should be noted for the period since FY1997.
First, household demand recorded a huge drop in FY1997. The contribution of household
demand in FY1997 declined 1.8% from the previous year, thus recording the first decline in 17
years since FY1980 (down 0.3%), when the world experienced a simultaneous recession due tothe second oil crisis. Moreover, this was the sharpest drop in post-war history, exceeding thedecline of 0.5% in FY1974 during the recession resulting from the first oil crisis.
Figure 1-1. Contribution of Household Demand to Domestic Demand Growth
%

%

14

14
12

12

OthersHousehold demand
Real domestic demand

10

10

8

8

6

6

4

4

2

2

0

0

-2

-2
-4

-4
56

Notes:
Source:58 60 62 64

66 68 70 72

74 76 78 80

82 84 86 88

90 92 94 96

98
(CY)

1. Household demand is defined as final household consumption expenditure + housing investment.
2. Real domestic demand = real GDP – net exports of goods and services.
Economic Planning Agency, “Annual Report on National Accounts” and “Quarterly Estimates of GDP.”

Second, household demand is in a long-term slump. Although household demand also
declined in FY1974 and 1980, it returned to positive growth the following year. FY1998 saw adecline in domestic demand for the second consecutive year (down 0.4%) for the first time since
the war. Thus, the current recovery of household demand is unusually weak.
Third, downward pressure on household demand since FY1997 has come from personal
consumption as well as from housing investment. Particularly in FY1997, the 1.1% decrease incontribution from housing investment was combined with the first negative growth of personal
consumption in the post-war era (down 1.2%), resulting in a 0.7% decline in contribution. In
FY1998, the negative contribution from housing investment continued (down 0.5%) while theDevelopment Bank of Japan Research Report/ No. 4

1

contribution from personal consumption turned positive (up 0.1%). However, household
demand remained sluggish overall, as the improvement in personal consumption owed much to
the rapid growth in the first quarter of 1999 (up 1.2% from the previous quarter).
The decline in household demand in FY1974 and 1980 was due to negative contributions
from housing investment (down 1.3% and 0.7% respectively) while personal consumption madepositive contributions (up 0.8% and 0.4% respectively). In comparison, the current situation isclearly marked by the slump of personal consumption.
Detailed data on personal consumption are available for the fiscal years after 1970. We
classified this data into “durables,” “semi- and non-durables” and “services.” Service
consumption was further classified into “fictitious consumption (imputed rent of owned houses
and medical expenses paid by social security)” and “other services.” Figure 1-2 shows thecontribution of each factor for the period between FY1971 and 1998.
Figure 1-2. Breakdown of Household Demand Contribution%
8%
8
DurablesHousing investment
Other services

6

Semi- and non-durables
Fictitious consumption
Household demand

6

4

4

2

2

0

0

-2

-2

-4

-4
71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98(CY)

Source:Economic Planning Agency, “Annual Report on National Accounts;” Management and Coordination Agency, “Annual
Report on the Family Income and Expenditure Survey” and “Consumer Price Index.”

In household demand in FY1997, the only positive contribution was fictitious consumption(i.e., imputed rent of owned houses and medical expenses paid by social security), which is not
actual consumption in any sense. Service consumption (excluding fictitious consumption), which
had remained steady during the previous recessions, also seemed to have fallen (down 0.3%).
Fictitious consumption is a concept particular to SNA statistics, and does not convey a sense of
consumption. Personal consumption has never experienced a growth in its fictitious
consumption only. As in FY1974 and 1980, durables consumption and housing investment
contributed negatively to household demand (down 0.5% and 1.1% respectively from theprevious year), partly in response to the surge in demand just before the consumption tax hike.
In FY1998, durables consumption showed signs of recovery (up 0.2% from the previousyear) led by personal computers, large household electrical appliances and light automobiles,
2

Development Bank of Japan Research Report/ No. 4

although service consumption (excluding fictitious consumption) is estimated to have continued
its decline (down 0.4%). As services are accounting for an increasing share of consumption as awhole, the continued reduction of service consumption (excluding fictitious consumption) in
FY1997 and 1998 illustrates the unprecedented nature of the current slump of household
demand.
2. Destabilization of Personal Consumption
This section verifies the fact that personal consumption, which is generally considered to bestable against the business cycle, has become increasingly responsive to economic fluctuations
and therefore unstable.
In order to identify this trend, we extracted that part of the personal consumption appearing
in SNA statistics which corresponds to cyclical fluctuation by excluding its long-term trend. The
calculation was made separately for the rapid growth period before the first oil crisis (2Q/554Q/73) and the ensuing stable growth period (1Q/74-2Q/99). For reference purposes, the longterm trend was also taken out of household demand.
Figure 1-3 indicates the long-term movements of seasonally-adjusted household demand andpersonal consumption on a calendar year, quarterly basis (2Q/55-2Q/99, thick lines) as well as
their trends (thin lines) in the rapid growth and stable growth periods.
In the rapid growth period, there is little deviation from the trend. In the stable growth
period, however, there are significant deviations both upward and downward. Downward
deviations have been predominant since the second quarter of 1997 in particular. Figure 1-4
shows this deviation in terms of the fluctuation of quarterly growth rate [ = (seasonally-adjusted
real value – estimated trend value)/estimated trend value]. The data clearly indicate that thefluctuation has grown.
In order to verify the level of the destabilization of household demand and personal
consumption, standard deviations were calculated from the quarterly growth rates appearing in
Figure 1-4. The result is shown in Table 1-1.
Figure 1-3. Seasonally-adjusted Values and Trends of Household Demand and Personal
Consumption(¥ billion)
350,000
Household demand and trend
during the stable growth
period (1Q/74-2Q/99)

300,000
Household demand and trend
during the rapid growth period(2Q/55-4Q/73)

250,000

Generation and collapseof the bubble economy

Current
recession

Secondoil crisisFirst
oil crisis

200,000
150,000

Final household consumption
expenditure and trend during the stable
growth period (1Q/74-2Q/99)

100,000

Final household consumption
expenditure and trend during the
rapid growth period (2Q/55-4Q/73)

50,000
0
55

60

65

70

75

80

85

90

95
(CY, quarterly basis)

Development Bank of Japan Research Report/ No. 4

3

Note:

The following function was used for calculating trends in both the rapid growth and stable growth period:
Function: ln (HD or HC) =a+b*T +g*T2
Variables: HD: real household demand(= final household consumption expenditure + housing investment)
HC: real final household consumption expenditure
T: timea10.302(1690.07)
11.905(1344.55)
10.256(1838.20)
11.775(1756.11)

Period
2Q/55 – 4Q/73
Householddemand1Q/74 – 2Q/99

Final household
consumption
expenditure

Source:2Q/55 – 4Q/73
1Q/74 – 2Q/99b0.0223(60.18)0.0102(25.67)0.0214(63.11)0.0111(36.83)g
4.86E-06(1.029)-2.60E-05(-7.07)-1.10E-06(-0.247)-3.00E-05(-10.75)

adj.R2

S.E.

0.99890.0171

0.98300.02920.99890.0157

0.99130.0221
Values within ( ) t-values.

Economic Planning Agency, “Annual Report on National Accounts” and “Quarterly Estimates of GDP.”

Figure 1-4. Fluctuation of Household Demand and Personal Consumption Growth(Excluding Trend)％8（2Q/55−4Q/73, 1Q/74−1Q/99）

Household demand (thick line)

6
4
2
0
-2
-4

Final household consumption
expenditure (dotted line)

-6
-8
55

Note:
Source:

4

60

65

70

75

80

85

90

95
(CY, quarterly basis)

Calculated by the following formula after excluding the trend from the seasonally-adjusted values of household demandand final household consumption expenditure appearing in Figure 1-3:
Quarterly growth rate = (seasonally-adjusted real value – estimated trend value)/estimated trend value.
Economic Planning Agency, “Annual Report on National Accounts” and “Quarterly Estimates of GDP.”

Development Bank of Japan Research Report/ No. 4

Table 1-1. Verification of Destabilization of Household Demand and Personal
Consumption(%)
Comparison between rapid and stable growth periods
HouseholddemandRapid growth
2Q/55-4Q/73
1.7

Comparison between recessions
Personal
consumption
1.5

2Q/57-2Q/58, 4Q/61-4Q/62,
4Q/64-4Q/65, 3Q/70-4Q/71

Householddemand1.2

Personal
consumption
1.3

Stable growth70s

1Q/74-2Q/99
1Q/74-4Q/79

2.9
1.2

2.2
1.3

All recessions during stable growth
1Q/74-1Q/75, 1Q/77-4Q/77

2.8
0.7

2.3
1.1

80s

1Q/80-4Q/89

2.5

1.7

1Q/80-1Q/83, 2Q/85-4Q/86

1.5

1.2

1Q/90-2Q/99

3.2

2.5

1Q/91-4Q/93, 1Q/97-2Q/99

3.6

3.0

90s

Note:
Source:Figures indicate standard deviations calculated from quarterly growth rates appearing in Figure 1-4.
Economic Planning Agency, “Annual Report on National Accounts” and “Quarterly Estimates of GDP.”The following observations can be made:(i) Both household demand and personal consumption show greater fluctuation during thestable growth period than during the rapid growth period.
(ii) During the stable growth period, the fluctuation shows a continual increase from the1970s (1Q/74-4Q/79) through the 1990s (1Q/90-2Q/99).
(iii) During recession, the fluctuation is somewhat subdued compared with the whole period
including the recovery phase in the 1970s and 1980s. In contrast, the fluctuation in the
1990s is greater during recession than in the whole period.
In summary, it is not true that the traditionally stable personal consumption suddenly
became responsive to business conditions and therefore unstable in FY1997. Rather, it graduallybecame responsive to the business cycle over the years, and the current recession perhaps merely
revealed this unstable tendency in a significant manner. This implies that consumption isincreasingly unlikely to play a supporting role in times of recession.
3. Destabilizing Factors as Reflected in Consumption StructureThis section discusses the factors behind the long-term destabilization of personal consumption.
As a method of identifying such factors, we extracted optional consumption items (withexpenditure elasticity to total consumption exceeding 1) to estimate their share in total
consumption expenditure. Since optional consumption expenditure is inherently not necessary, it
tends to increase in good times, but is easily curtailed in bad times to make ends meet. In short,spending on such optional items largely depends on each consumer’s discretion. Therefore, an
upward trend in the share of optional consumption items represents increased responsiveness ofthe consumption structure itself to business conditions.
Figure 1-5 shows estimates of the weight of optional consumption items. Data on ordinary
households (all households composed of two or more persons) are based on the current Family
Income and Expenditure Survey, which started in 1963. Data on one-person households (allhouseholds) are based on National Survey of Family Income and Expenditure conducted in 1989
and 1994 as well as on Annual Report on the Income and Expenditure Survey for one-person
Households from 1995 through 1998. The following two characteristics can be identified.
First, the weight of optional consumption in ordinary households has risen about 10% in the
35 years since the start of the current Family Income and Expenditure Survey, and remains at alevel similar to that during the bubble years (32.6% in 1963, 44.2% in 1989, 44.9% in 1996 and44.1% in 1998). Thus, the consumption structure itself had gradually become responsive to thebusiness cycle by the time of the bubble. Also, it is interesting to note that the consumption
Development Bank of Japan Research Report/ No. 4

5

structure has remained almost unchanged since the bubble period as overall consumption slowed
down in the 1990s and has even declined since FY1997.
Figure 1-5. Share of Optional Consumption in Total Consumption Expenditure%50

One-person households
89

48

94

46
44
42
40

Ordinary households

38
36
34
32

63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97(CY)

Source:Management and Coordination Agency, “Annual Report on the Family Income and Expenditure Survey,” “National
Survey of Family Income and Expenditure,” and “Annual Report on the Income and Expenditure Survey for oneperson Households.”

Figure 1-6. Breakdown of Optional Consumption by Household Structure％
100(1) Ordinary households％
100(2) One-person households

80

Semi- and non-durables

Durables80
Semi- and non-durables
60

Durables

60

40

40
Services

200Services20063 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97
89
94
95
96
97
98
(CY)
(CY)
Source: Management and Coordination Agency, “Annual Report on the Family Income and Expenditure Survey,” “National
Survey of Family Income and Expenditure,” and “Annual Report on the Income and Expenditure Survey for oneperson Household Expenditure.”

6

Development Bank of Japan Research Report/ No. 4

Although the weight of optional consumption in one-person households is higher than thatin ordinary households, it is lower than in the bubble period (48.8% in 1989, 47.7% in 1996 and44.7% in 1998).
Second, a breakdown of optional consumption (see Figure 1-6) indicates that in ordinary
households, the weight of durables has remained almost constant while that of semi- and nondurables has declined gradually (40.9% in 1963, 25.7% in 1989, 21.8% in 1996 and 21.3% in1998). On the other hand, the share of service consumption has been on the rise (48.8% in 1963,
60.2% in 1989, 64.0% in 1996 and 64.8% in 1998).
One-person households have experienced similar changes in the composition of optional
consumption, but service consumption has a slightly larger share to the detriment of durables.
The increase in the weight of services in optional consumption means more room to cut back onservice consumption in case of a substantial business downturn. This may partly explain the
reduction in service consumption (excluding fictitious consumption) in FY1997 and 1998
according to SNA statistics, as discussed in Section 1 of the present chapter.
Thus, the rising share of optional consumption not only reflects the improvement in living
standards, but also indicates that the structure of consumption is becoming increasingly
responsive to the business cycle. The expected increase in one-person households also makes
further destabilization of consumption inevitable from a structural viewpoint, with heavier weightof optional consumption (share of one-person households: 16.5% in 1960, 25.6% in 1995, 26.6%
in 2000 and 29.7% in 2020).
This implies that any serious business downturn in the future may be accompanied by asimilar consumption slump. However, consumption should make a positive contribution during
the subsequent economic recovery.

Development Bank of Japan Research Report/ No. 4

7

II. Impact of Income and Employment Conditions on Consumption in the
Post-bubble Period
Focusing on the consumer environment after the collapse of the bubble economy, this chapter
discusses the reasons for the decline and slump of personal consumption since FY1997 fromthree aspects: income and employment environment, balance sheet and future prospects.
The household consumption environment has become distorted in the 1990s compared withthe past, exerting downward pressure on overall consumption; this chapter shows that thisphenomenon has become visible only since FY1997.
1. Changes in Household Income Conditions
Based on SNA statistics, Figure 2-1 shows the contribution of gross income (before deducting
tax, insurance premiums, etc.) and net transfer income to the growth of real disposable income
over the long term from FY1956 through 1997. Here, disposable income differs from thatappearing on the household income statement in that it excludes corporate income imputed toowned houses and the part of medical expenses paid by social security schemes, whichcorrespond to fictitious consumption, to better illustrate the availability of resources.
Figure 2-1. Contribution to the Growth of Real Disposable Income of Households
%
14

%
14

12

12

Gross income
Net transfer income
Disposable income

10

10

8

8

6

6

4

4

2

2

0

0

-2

-2

-4

-4

-6

-6
56

Notes:

Source:858 60 62

64 66 68

70 72 74

76 78 80

82 84 86

88 90 92

94 96

(FY)

1. Disposable income does not include corporate income imputed to owned houses and the part of medical expenses
paid by social security, which correspond to fictitious consumption. Data for FY1955-69 exclude corporate incomeon owned houses only, for the amount of medical expenses paid by social security is not available. Therefore, a slight
discontinuity exists between FY1969 and 1970.
2. Gross income = compensation of employees + net property income + income from private unincorporated nonfinancial enterprises excluding corporate income imputed to owned houses.
3. Net transfer income = net social security benefits – medical expenses paid by social security – direct tax + other net
current transfer, etc. = disposable income – gross income.
As in the case of disposable income, a slight discontinuity exists between FY1969 and 1970.
Final household consumption expenditure deflator is used for converting data into real values.
Economic Planning Agency, “Annual Report on National Accounts.”

Development Bank of Japan Research Report/ No. 4

The harsh income conditions after the bubble economy deserve particular attention. The
growth of real disposable income has slowed even further since FY1992. Gross income and net
transfer income both declined in FY1997 for the first time since the war (down 1.3% from theprevious year).
The post-bubble slump of real disposable income becomes even clearer when we divide thestable growth period into two segments, from FY1974 through 1991 and from FY1992 through1997. The average growth of 0.8% in the latter period is less than one third of the growth rate in
the former period (3.0%). The primary reason for this sluggishness is that the contribution fromgross income has remained near zero (average growth: 3.6% for FY1974-91 and 0.0% for
FY1992-97). Thus, the post-bubble income growth came in the three years from FY1994
through 1996, when the contribution from net transfer income turned positive (averagecontribution: -0.7% for FY1974-91 and 0.8% for FY1992-97) thanks to the special income andinhabitant tax relief measures.
Figure 2-2 breaks down the long-term contribution of gross income from FY1956 through1997 into three factors: compensation of employees, net property income and income fromprivate unincorporated non-financial enterprises excluding corporate income imputed to ownedhouses.
Figure 2-2. Contribution of Gross Household Income
%
14
12
10
8
6
4
2
0
-2
-4

%
14
12
10
8
6
4
2
0
-2
-4
56

58

60

62

64

66 68

70

72

74

76 78

80

82

84

86 88

90

92

94

96
(FY)

Income from private unincorporated non-financial enterprises excluding corporate income imputed to owned houses
Net property income
Compensation of employees
Gross income

Note:
Source:See Figure 2-1.
Economic Planning Agency, “Annual Report on National Accounts.”

The contribution of gross income has stayed near zero since the collapse of the bubble
economy not only because the contribution of compensation of employees, which accounts for
80 to 85% of gross income, has substantially declined (average contribution: 3.3% for FY1974-91
and 1.4% for FY1992-97), but also because the contribution of net property income, accounting
for about 10% of gross income, has turned negative against the backdrop of low interest rates(average contribution: 0.6% for FY1974-91 and -1.1% for FY1992-97). Meanwhile, thecontribution of income from private unincorporated non-financial enterprises excluding
corporate income imputed to owned houses has stayed almost unchanged over the years (averagecontribution: -0.3% for FY1974-91 and -0.3% for FY1992-97).
Development Bank of Japan Research Report/ No. 4

92. Changes in Consumption Propensity According to Permanent Income Hypothesis
Figure 2-3 illustrates the contribution of real compensation of employees in terms of the number
employed in all industries and per capita income.
Comparing the pre-bubble and post-bubble periods, the contribution of the number
employed has halved (average contribution: 1.6% for FY1974-91 and 0.8% for FY1992-97),
while that of per capita income has dropped almost to zero (1.7% for FY1974-91 and 0.2% for
FY1992-97).
Real compensation of employees declined further in FY1998. It recorded an increase of
0.4% on the previous year in FY1997, but FY1998 saw the first negative contribution from realcompensation of employees in the post-war period (down 1.2% from the previous year).
Moreover, the contribution of per capita income declined for the second consecutive year in
FY1998 (down 0.5%), while the number employed declined for the first time in the post-year
period and made a negative contribution (down 0.7%).
Figure 2-3. Breakdown of Contribution of Real Compensation of Employees
%

%

10

10
Number employed
Per-capita income
Compensation of Employees

8

8

6

6

4

4

2

2

0

0

-2

-2

-4

-4
56

Notes:
Source:

58

60

62

64

66

68

70

72

74

76

78

80

82

84

86

88

90

92

94

96

98
(FY)

1. The number employed is for all industries.
2. Final household consumption expenditure deflator is used for converting data into real values, but it is substituted
with the final private consumption expenditure deflator for FY1998.
Economic Planning Agency, “Annual Report on National Accounts” and “Quarterly Estimates of GDP;” Management
and Coordination Agency, “Annual Report on the Labor Force Survey.”

Although the government included employment measures in the economic stimulus packageof November 1998 as well as in this year’s first supplementary budget, per capita income isexpected to be under pressure for some time to come. Reflecting the deterioration of corporate
profits and weak prices, the wage increase in the spring of 1999 again hit a record low of 2.21%.
Companies are replacing regular workers with temporary and daily workers including part-time

10

Development Bank of Japan Research Report/ No. 4

employees to cut back on personnel costs.
Such developments are reflected in the composition of per capita wage and salary (Ministryof Labor, “Monthly Labor Survey”), which provides the basis for estimating per capita income(see Figure 2-4). Traditionally, wage adjustment during recession took the form of reducing
overtime pay and bonus/special earnings. In contrast, the current recession has been marked by
cuts in regular wage and salary since the first quarter of 1999, thus making a negative
contribution of 0.9%. Consumers have never before seen a leveling-off of their regular wage andsalary, which account for 70% of total wage and salary, and they may have begun to consider the
reduction of income not as a temporary phenomenon but as a permanent trend, thus exerting asignificant impact on consumer behavior.
Figure 2-4. Breakdown of Contribution to the Growth of Per-Capita Wage and Salary
%
6

%
6

4

4

2

2

0

0

-2

-2

-4

Regular wage and salary

Overtime pay

Bonus and special earnings

-4

Total

-6

-6
80

82

84

86

88

90

92

94

96

98
(FY)

2Q
97

4Q
97

2Q
98

4Q
98

2Q
99

(CY, quarterly basis)

Note:
Source:Coverage extends to business establishments with 30 or more employees.
Ministry of Labor, “Monthly Labor Survey.”

Using a consumption function based on the permanent income hypothesis, the following
section verifies this trend by comparing short-term and long-term marginal propensity toconsume in the pre-bubble and post-bubble periods according to SNA statistics.
The upper box in Table 2-1 describes the permanent income hypothesis-based formula ofconsumption function used in this analysis. As consumption expenditure only includes services
obtained from durable goods according to the permanent income hypothesis, the purchase valueof durable goods is excluded from this analysis. However, no data on services obtained fromdurable goods are available in SNA statistics. Therefore, our estimate uses the total value of semiand non-durables and service consumption expenditures. Quarterly data on consumption
expenditure and disposable income are seasonally adjusted (using the Census Bureau Method
Type X-11). They are translated into real values using the weighted average of deflators on semidurables, non-durables and service consumption expenditures based on the value of eachconsumption expenditure.
Development Bank of Japan Research Report/ No. 4

11

Table 2-1. Estimation of Changes in Consumption Propensity According to Permanent
Income Hypothesis
Consumption function formula based on permanent income hypothesis① Ct = kqYt + (1 – q+g)Ct-1② Ct = kYpt
③ Ypt =qYt + (1 – q)Yp.t-1 + gYp.t-1④ lnYt =a+bt
C: real semi- and non-durables + service consumption expenditure(seasonally adjusted)
Ypt : permanent income
Yt : real household disposable income (seasonally adjusted)k : long-term marginal (average) propensity to consume
kq : short-term marginal (average) propensity to consume
where, 0≦q≦1
g : long-term average growth (quarterly) =bt: timeResults of estimate
Period2Q/74 - 1Q/98

kq
0.0952(4.155)
2Q/74 - 1Q/91
0.0547(2.865)
2Q/74 - 1Q/97
0.0716(3.461)
2Q/91 - 1Q/98
0.3244(3.360)Estimate according to OLS, Values within (Notes:

Source:gk
1 – q+gq
0.88340.01%
0.77550.1228(29.869)<2.51%>
0.93690.01%
0.7881
0.0694(37.642)<2.55%>
0.91450.01%
0.77990.0918(34.182)<2.56%>
0.59090.00%
0.78640.4125(4.808)<1.36%>) are the t-values, Values within < > are annual rates.

adj.R2
0.987
0.983
0.987
0.880

1. As consumption expenditure only includes services obtained from durable goods according to the permanent
income hypothesis, the purchase value of durable goods is excluded from this analysis.
2. For consumption expenditure and disposable income, quarterly data from 1Q/70 through 1Q/98 are seasonallyadjusted by the Census Bureau Method Type X-11.
3. Consumption expenditure and disposable income are converted into real values using the weighted average ofdeflators for semi-durables, non-durables and service consumption expenditures based on the value of eachconsumption expenditure.
Economic Planning Agency, “Annual Report on National Accounts” and “Quarterly Estimates of GDP.”

Our estimate uses the OLS method and covers the stable growth period from the second
quarter of 1974 through the first quarter of 1998. Since data are only available until the firstquarter of 1998, the impact of the current leveling-off of regular wage and salary cannot be fully
verified. Nonetheless, our estimate confirms the upward trend of short-term marginal propensity
to consume in the post-bubble economy, implying that consumers increasingly consider thecurrent change in income as a change in permanent income.
The lower box of Table 2-1 shows four sets of estimation results. For the whole estimation
period, long-term marginal consumption propensity (k) and short-term marginal consumption
propensity (kq) are estimated to be 0.776 and 0.095 respectively. If we divide the whole period
12

Development Bank of Japan Research Report/ No. 4

into the period before the collapse of the bubble economy (2Q/74-1Q/91) and the period
thereafter (2Q/91-1Q/98), it becomes clear that the long-term propensity (k) has remained
almost static at about 0.79 while the short-term propensity (kq) has risen substantially from 0.055
to 0.324. In this case, the component ratio (q) of actual income (Yt) in period t to permanent
income (Ypt) in period t in formula ③ has increased from 0.069 to 0.413, which can beinterpreted as evidence of the considerable impact of present income on the formation of
permanent income.
When the estimate period is curtailed to until FY1996 (i.e., 2Q/74-1Q/97), short-term
marginal consumption propensity (kq) equals 0.072 for the post-bubble period, which is slightly
higher than the period before the collapse of the bubble economy. In short, short-term marginal
propensity to consume (kq) becomes greater as the estimation period is moved progressively
from the pre-bubble to post-bubble years, indicating the larger impact of present income. Thisimplies that judging from the result of our estimate using a consumption function based on thepermanent income hypotheses, the income environment in the post-bubble period has exerted
downward pressure on consumption. This also corresponds with the fact verified in Chapter 1that the destabilization of consumption became visible during the recession in the 1990s.

Development Bank of Japan Research Report/ No. 4

13

III. Impact of Post-bubble Balance Sheet on Consumption
1. Changes in Balance Sheet of Household Sector
The balance sheet of the household sector should also be considered. This section identifies thecharacteristics both assets and liabilities in the post-bubble period and assesses whether they haveexerted downward pressure on consumption.
According to SNA statistics, Figure 3-1 shows the long-term trend of gross national assets infive sectors (households, non-financial corporations, financial institutions, general government,
private non-profit organizations serving households) from 1970 through 1997.
Figure 3-1. Sectoral Distribution of Gross National Assets(¥ trillion)
8,000
7,000

Private non-profit organizations
General government

6,000

Financial institutions
Corporations

5,000

Households

4,000
3,000
2,000
1,000
0
70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97(end CY)

Source:Economic Planning Agency, “Annual Report on National Accounts.”

The outstanding of gross national assets ballooned due to the rise in land and stock prices
during the bubble economy in the late 1980s (from ¥3,936 trillion at end 1985 to ¥7,163 trillion
at end 1991: average annual growth rate of 8.9%), only to level off abruptly with the collapse of
the bubble economy (from ¥6,905 trillion at end 1992 to ¥7,422 trillion at end 1997: annual
growth of 1.2%). In the household sector, which is the largest asset-holder in the national
economy, the amount of assets rose in the bubble years (from ¥1,436 trillion at end 1985 to¥2,650 trillion at end 1991: annual growth of 9.2%) but has remained almost static since thecollapse of the bubble economy (from ¥2,499 trillion at end 1992 to ¥2,557 trillion at end 1997:
annual growth of 0.4%), thus moving almost in parallel with gross national assets.
Figure 3-2 illustrates the balance sheet of the household sector. Assets are shown on the left
side and liabilities on the right side. The bars indicate amounts and the lines ratios.
The asset side is marked by capital losses due to asset deflation in the post-bubble period.
The ratio of latent assets, the sum of land (and other non-reproducible tangible assets) and stock
in total assets, has declined for eight consecutive years after peaking at the end of 1989 (from63.5% at end 1989 to 46.6% at end 1997). Although the decline in the latent asset ratio was
observed in the wake of the first oil crisis (from 62.5% at end 1973 to 51.7% at end 1977), the14

Development Bank of Japan Research Report/ No. 4

current decline is different in terms of the actual value of latent assets. Whereas total assets
continued to increase under inflation from ¥277 trillion at the end of 1973 to ¥333 trillion at theend of 1977, the current recession has seen the value of latent assets decline for sevenconsecutive years to ¥1,190 trillion at the end of 1997, after peaking at ¥1,681 trillion at the endof 1990. Total loss in asset value amounts to ¥491 trillion (annual average of ¥70 trillion), of
which land, etc. accounts for ¥414 trillion (¥59 trillion) and stock ¥77 trillion (¥11 trillion). Thisis the first time that the absolute value of latent assets has declined for such a long period, and so
it is important to consider the impact of this long-term decline on the consumption behavior ofhouseholds.
On the other hand, the outstanding of liabilities has remained at a high level even after thecollapse of the bubble economy. Although liabilities have never been reduced even in previous
recessions, the current recession has been marked by a deterioration of the ratio of liabilities toassets. While liabilities reached ¥370 trillion at the end of 1997, the liability-asset ratio rose
gradually to reach the record-high level of 14.5% at the end of 1997 as asset values leveled off.
The deterioration of the ratio of debts to real assets is more visible as real asset values have fallen.
Since bottoming out at 14.7% as at the end of 1987, it had risen to a record-high level of 23.0%
by the end of 1997.
Figure 3-2. Balance Sheet of the Household Sector(¥ trillion)
3,000−Assets−

2,500

2,000

Liabilities
Other financial assets
Stock
Land, etc.
Net fixed assets
Inventories−Liabilities−(Land, etc. + stock)/assets (right scale)

1,500

Debts/non-financial assets(right scale)

50

30
20

500
Liabilities/assets (right scale)

0

10
0

70 72 74 76 78 80 82 84 86 88 90 92 94 96(end CY)

Source:

60

40

1,000

Notes:%
70

70 72 74 76 78 80 82 84 86 88 90 92 94 96(end CY)

1. Land, etc. represents non-reproducible tangible assets including forests, underground resources and fishing banks.
2. Net fixed assets represent the total of housing, buildings other than housing, other structures, transport equipment,machinery and appliances, etc.
3. Non-financial assets represent the total of inventories, net fixed assets, land, etc.
4. Debts represent the total of private banks and government loans.
Economic Planning Agency, “Annual Report on National Accounts.”

Development Bank of Japan Research Report/ No. 4

15

2. Impact of Debt Deflation and Housing Loan Repayments
As post-bubble disinflation gives way to deflation and as stagnant nominal income growth isincreasingly recognized as a permanent trend, households with liabilities may become morecautious about their consumption behavior due to increased burden of already contracted
liabilities in real terms (debt deflation). It is therefore worth examining developments on theliability side.
According to the SNA statistics, Figure 3-3 shows the long-term trend (FY1970-97) of
disposable income and liabilities (of which housing loans) in the pure household sector(excluding proprietorships) in a bar chart. The lines in the chart indicate the ratio of liabilities (ofwhich housing loans) to disposable income. In order to obtain data corresponding to the pure
household sector as well as to make them approximate to actually received income, disposable
income here does not include operating surplus and the part of medical expenses paid by social
security, which are both included in disposable income on the household income statement.
Since the collapse of the bubble economy, liabilities have been growing faster thandisposable income, with the former exceeding the latter since FY1994. The ratio of liabilities todisposable income had risen to 103.7% by FY1997. In particular, housing loans, which accountfor some 70% of household liabilities, have been on an upward trend as measures to facilitate
housing purchases were integrated in the post-bubble economic stimulus packages. As a result,
the ratio of housing loans to disposable income had risen to 72.1% by FY1997. Under the harshincome conditions, the boost given by the economic stimulus packages for housing investment,
another component of household demand, may have led households with liabilities to sufferfrom debt deflation.
Figure 3-3. Liability (Housing Loan)/Disposable Income Ratio in Pure Household
Sector (Excluding Proprietorships)(¥ trillion)
350
300
250

%
120
Disposable income
Liabilities
Housing loans
Liability ratio (right scale)
Housing loan ratio (right scale)

100

80

200
60
150
100
50
0

40

20

0

70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97(FY)
Notes:
1. Pure household liabilities and housing loans are year-end figures.
2. As liabilities (housing loans) here are limited to the pure household sector, which does not include proprietorships,
corresponding adjustments are made for disposable income by excluding operating surplus and the part of medical
expenses paid by social security.
Source: Economic Planning Agency, “Annual Report on National Accounts.

16

Development Bank of Japan Research Report/ No. 4

Among the households with liabilities in the Family Savings Survey published by theManagement and Coordination Agency, the following section focuses on those households
repaying housing or land loans and examines the relation between annual income per household
and liabilities for housing and land.
Figure 3-4, which covers all households, indicates that the households with liabilities forhousing and land accounted for about 30% of all households from the 1980s through 1998. If wefocus on households with housing or land loans, the macroscopic trend indicated by Figure 3-3
becomes much clearer. In the 1990s, liabilities grew rapidly (from ¥10.65 million in 1993 to¥15.04 million in 1998) while annual income stagnated, resulting in a sharp rise in the liabilityannual income ratio since 1994 (from 118.0% in 1993 to 168.7% in 1998).
Figure 3-4. Housing and Land Liabilities and Annual Income(¥ thousand)

%
180

16000
Annual income

14000

160

Liabilities for housing and land

12000

140

Liability-annual income ratio (right scale)

10000

120

8000

100

6000

80

4000

60

2000

40
(CY)

0

20

72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98

Notes:

1. Data cover households with housing or land loans.
Share of households with housing or land loans in all households(%)

PeriodShare (avg.)

Source:1972-75

1976-80

1981-85

1986-90

1991-95

1996-98

19.5

25.5

29.4

32.8

30.5

30.4

2. Liability outstanding is as at the end of the calendar year.
3. Liability-annual income ratio = liabilities for housing and land/annual income.
Management and Coordination Agency, “Family Savings Survey.”

Figures 3-5 and 3-6 show the relationship between the change in annual income and in
liabilities or the liability/annual income ratio by timing of housing construction for working
households with housing or land loans.
Figure 3-5 clearly illustrates that the households that built their houses directly after thecollapse of the bubble economy (1990-94) are severely faced with debt deflation. For thehouseholds that built their houses in the 1975-79, 1980-84 and 1985-89 periods, annual income
rose 1-7% in the three years following the construction year while liabilities fell continuously by
5-8%. In contrast, the households that built their houses in the 1990-94 period experienced adecline in annual income (down 0.5%) while liabilities only reduced by 2.3%.
Figure 3-6 shows the change in the liability-annual income ratio by elapsed time sinceconstruction. The long-term trend of the liability-annual income ratio at one year, five years andnine years after construction indicates that the ratio becomes higher for those who built theirhouses later. In particular, the ratio exceeds 2.5 times in the year after construction for thehouseholds that built their houses in 1996 and 1997.
Development Bank of Japan Research Report/ No. 4

17

Moreover, the liability-income ratio tended to decline over time for the households that hadbuilt their houses by the first half of the 1980s, while for the households whose houses wereconstructed in the latter half of the 1980s, the ratio stopped declining five years and one year
after construction respectively. Those who built their houses in the late 1990s in particular are
estimated to be suffering an increasing burden of liabilities.
Figure 3-5. Rate of Increase in Annual
Income and Decrease in Liabilities by
Timing of Housing Construction

Figure 3-6. Liability-Annual Income Ratio
by Timing of Housing Construction%300

8(Annual income growth: %)

85〜89

6

One year after construction

250

80〜84

200

4

150
2

75〜79

100

0
(Liability reduction: %)

90〜94
-2
0

-2

Notes:

Source:

-4

-6

-8

-10

1. Data cover working households with housing
or land loans.
2. Liabilities are for housing and land. Values of
liabilities are at the end of the calendar year.
3. Annual income growth and liability reduction
represent average changes in the three years
following the year of housing construction. For
example, annual income (liabilities) for the
1975-79 period indicates the simple average forthose households whose houses wereconstructed in each of the five years.
Management and Coordination Agency, “Family
Savings Survey.”

Five years after
construction

50
Nine years after construction

0(Year ofconstruction )68 70 72 74 76 78 80 82 84 86 88 90 92 94 96

Notes:

Source:1. Data cover working households with housing
or land loans.
2. Liabilities are for housing and land. Liability
values are at the end of the calendar year.
Management and Coordination Agency, “Family
Savings Survey.”

The consumption behavior of those households with liabilities that have experienced anincrease in liability burden merits particular attention.
Figure 3-7 compares households repaying housing loans with those without housing loan
repayments in terms of the relationship of real consumption growth (bars) and the loan
repayment-disposable income ratio (lines) from 1978 through 1998. Loan repayments forhouseholds without housing loan repayments represent repayments of consumer, education andother loans.
The loan repayment-disposable income ratio for the households without housing loan
repayment is naturally low, although it has been rising gradually (from 4.5% in 1978 to 6.2% in1998). On the other hand, the ratio for the households with housing loan repayment rose
gradually until 1992 (from 17.5% in 1978 to 19.4% in 1992), remaining at a high level since 1993
(22.2% in 1993 and 23.2% in 1998). As the loan repayment ratio remains high, the drop in realconsumption in repaying households has been greater in general than in non-repaying
households.
18

Development Bank of Japan Research Report/ No. 4

If disposable income remains constant, repayments of housing loans, etc. may reduce
household consumption by the corresponding amount.
Figure 3-7. Relations of Housing Loan Repayments with Real Consumption Expenditure%
6

Consumption growth forhouseholds without housing loan
repayment (left scale)4

Loan repayment-disposable income ratio forhouseholds with housing loan repayment(right scale)

%
30

25

2

20

0

15
Consumption growth forhouseholds with housing loan
repayment (left scale)

-2

10

-4

5

Loan
repayment-disposable
incomeratio
Loan
repayment-disposable
incomeratioforforhouseholdhouseholdwihtout
wihtout
housing
loan
repayment(rightscale)
housing
loan
repayment(rightscale)
-6

0
78

80

82

84

86

88

90

92

94

96

98

(CY)

Share of households with housing loan repayment in all working households
(%)

CY

1978

1980

1985

1990

1995

1998

Share

22.9

24.7

30.8

29.9

30.0

32.2

Source: Management and Coordination Agency, “Annual Report on the Family Income and Expenditure Survey,” and“Consumer Price Index.”Figure 3-8 calculates the savings ratio for repaying and non-repaying households and breaks
it down in terms of change in stock. The savings ratio has been consistently higher for the
repaying households, about half of which is accounted for by the net reduction in loans. The netincrease in financial assets is greater in the non-repaying households.
The net increase in property such as land and housing raised the savings ratio for nonrepaying households from 1994 through 1996. Meanwhile, active housing investment(accompanied by a net increase in debts) raised the savings ratio from 23.6% in 1994 to 25.3% in
1996, of which the net increase in property rose from 4.4% in 1994 to 7.3% in 1996.
The case of net decrease in debts including housing loans raising the savings ratio can be
confirmed for repayment households since 1993, when their loan repayment burden started toremain high according to Figure 3-7. The net decrease in debts has been gradually accelerating(from 15.8% in 1993 to 17.4% in 1998), indicating a contribution to the rise in savings ratio(from 30.1% in 1993 to 33.7% in 1998).
Thus, households with housing loans and other liabilities are faced with debt deflation as
income conditions have deteriorated since the collapse of the bubble economy, and are suffering

Development Bank of Japan Research Report/ No. 4

19

from considerable downward pressure on consumption. Debt deflation is one of the primaryfactors characterizing the consumer environment in the post-bubble period.
Figure 3-8. Housing Loan Repayments and Savings Ratio
%
50

%
50
Net increase in financial assets
Net decrease in debts
40

Households with housing
loan repayment

Net increase in property
OthersHouseholds without housing
loan repayment

40

30

30

20

20

10

10

0

0

-10

-10
78 80 82 84 86 88 90 92 94 96 98(CY)

Notes:

Source:78 80 82 84 86 88 90 92 94 96 98(CY)

1. Net increase in financial assets includes carry-over of net increase.
2. Savings ratio = (net increase in financial assets + net increase in property + net decrease in debts + other net
increase)/disposable income*100
Management and Coordination Agency, “Annual Report on the Family Income and Expenditure Survey.”

3. Impact of Capital Losses Due to Asset Deflation
This section focuses on the impact of capital losses due to asset deflation, which is another aspectof the deteriorating balance sheet. Until the current recession, the value of latent assets had neverdeclined for such a long period. It is therefore important to examine its impact on household
consumption behavior.
This section explicitly integrates the capital gains or losses on assets, into a consumptionfunction based on the traditional life-cycle hypotheses to verify the impact on consumption ofcapital gains or losses on assets according to the SNA statistics. Typically, this type of function
can identify the impact of asset effect and capital gain effect on consumption separately. The
present analysis differs from previous studies on capital gains and losses in that it separates theeffect of capital gains accrued in the current period and the effect of accumulated capital gains
accrued in the past to confirm any difference in the precision of the estimated results. The
sources of capital gains or losses are classified into non-financial assets ( = inventories + net
fixed assets + non-reproducible tangible assets), net financial assets ( = financial assets –liabilities) and net assets, which represent the total of the first two elements. Capital gains andlosses are converted into real-term values according to McElroy (1971).
Table 3-1 shows the results. All estimates cover the period between 1971 and 1997, and the20

Development Bank of Japan Research Report/ No. 4

maximum likelihood method is used considering first-order autocorrelation on disturbances.
Case ① uses capital gains or losses accrued in the current period, while Case ② uses accumulated
capital gains based on 1969, the year to which the current series of asset data dates back.
In both cases, the coefficients indicating the effect of capital gains on assets (TC, ATC)
proved to be significant, meeting the sign condition. When non-financial assets (RC, ARC) andnet financial assets (FC, AFC) were separated, however, the coefficients were only significant for
the former. In other words, although the accrual of capital losses in the current period or the
reduction of accumulated capital gains due to asset deflation may have a negative impact on
consumption, the impact primarily comes from non-financial assets and not from net financial
assets. The best performance was obtained in Case ②-2, using the consumption function taking
into account accumulated capital gains on net assets (see Figure. 3-9). In this case, the possibilityof first-order autocorrelation on disturbances was rejected at the significance level of 5%.
Table 3-1. Impact on Consumption of Capital Gains or Losses on Assets(Results of Estimate Using a Life-cycle Consumption Function)<Type of function>
Final household consumption expenditure = constant term + a ´ (asset balance at end of previous period) + g ´ (capital gains orlosses on assets) + disturbance<Results>① Case using capital gains or losses accrued in the current period
Case

PeriodConstant term

1

1971 - 97-8761.6

0.81930.0108

-0.85

17.16

2.88

-8321.3

0.81500.01130.0103

-0.79

15.52

2.60

2.25

-7864.2

0.82330.00960.0134-0.0051

-0.68

15.13

2.24

2.78

-0.48

RC

FC

2
3

1971 - 97
1971 – 97

YD

NA(-1)

AS

TC

RC

FC

adj.R2

DW

0.952

1.53

2229.2

0.950

1.51

2277.7

0.929

1.30

2225.3S.E.

② Case using accumulated capital gains (1969 as base year)
Case

PeriodConstant term

1

1971 - 97-8757.5

0.81940.0108

-0.85

17.14

2.88

5245.80.46660.08330.0119

1.11

6.81

6.54

5.40

6336.50.4621

0.812

0.01370.0024

1.27

6.66

6.15

4.12

0.19

2
3

Notes:

1971 - 97
1971 - 97

YD

NA(-1)

ASTC

adj.R2

DW

0.952

1.53

2229.0

0.994

1.77

1619.3

0.993

1.72

1638.2

S.E.

1. The maximum likelihood method is used for the estimation.
2. The following variables are used for the estimation. All variables are for the household sector (including
proprietorships) on CY real basis (converted by final household consumption expenditure deflator).
Explained variable: final household consumption expenditure
Explanatory variables:
YD : disposable income
NA(-1) : net assets (previous term-end)
TC : capital gains or losses on net assets (current period)
RC : capital gains or losses on non-financial assets (current period)
FC : capital gains or losses on net financial assets (current period)
AS : net assets (previous term-end) + capital gains or losses on net assets (current period)
NA69(-1) : accumulated net assets, 1969 as base year (previous term-end)

Development Bank of Japan Research Report/ No. 4

21

Source:

ATC : accumulated capital gains or losses on net assets, 1969 as base year
ARC : accumulated capital gains or losses on non-financial assets, 1969 as base year
AFC : accumulated capital gains or losses on net financial assets, 1969 as base year
3. Real-term capital gains or losses on non-financial assets for the current period, real-term capital gains or losses on net
financial assets for the current period and real accumulated net assets based on 1969 values are calculated as follows.
· Real-term capital gains or losses on non-financial assets for the current period = real-term non-financial assets(year end) – real-term previous term-end non-financial assets (previous year end) – [real-term (gross fixed capitalformation + increase in inventories + (net) land purchases – fixed capital depreciation)].
· Real-term capital gains or losses on net financial assets for the current period = real-term net financial assets (yearend) – real-term previous term-end net financial assets (previous year end) – [real (net increase in financial assets– net increase in liabilities)].
· Real-term accumulated net assets based on 1969 values = real-term 1969 year-end net assets + cumulative total of[real-term (gross fixed capital formation + increase in inventories + (net) land purchases – fixed capitaldepreciation + net increase in financial assets – net increase in liabilities)] for each year since 1970.
Real-term accumulated capital gains based on 1969 values represent the cumulative total of real-term capital gains
and losses for each year since 1970.
4. t-statistics in the lower line for each estimate.
5. The possibility of first-order auto correlation on random error is rejected at the significance level of 5% in Case ②-2.
Other cases stay in the inconclusive region.
Economic Planning Agency, “Annual Report on National Accounts.”

Of course, accumulated unrealized gains would have different levels of impact on individual
households, as the period of asset holding differs in each household. A household that obtained
assets at the peak of the bubble economy is now faced with accumulated capital losses, while ahousehold that has been holding assets for a much longer period of time is facing a reduction inaccumulated capital gains. The result of Case ①-2 is supposed to comprise both of these cases. In
any case, from a macroeconomic viewpoint, capital losses on assets accrued in the current period
may restrict immediate consumption. Moreover, the long-term effect of capital gains may haveexerted downward pressure on consumption following the collapse of the bubble economy in theform of the accumulation of capital losses or reduction of accumulated capital gains on assets.
Consequently, households that have traditionally based their consumption behavior on the
expected increase in accumulated capital gains may have begun to realize that capital gains on
assets do decline.
Figure. 3-9. Performance of Estimated Consumption Function Using Accumulated
Capital Gains Based on 1969 Values (② Case 2)(¥ trillion)
300
280
260
240
220
200
180
160
140
120
100

Actual value
Estimated value

71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97(CY)
Source:22

Economic Planning Agency, “Annual Report on National Accounts.

Development Bank of Japan Research Report/ No. 4

IV. Changes in Future Perspective of Consumers
The third factor to consider for the post-bubble consumer environment is consumer confidence,
particularly consumers’ view of the future.
Figures 4-1 to 4-3 extract or show as a diffusion index some consumer confidence indicators
reported in various documents of the Ministry of Health and Welfare, the Bank of Japan and theEconomic Planning Agency. They clearly illustrate the contrast of consumer confidence for thepresent and the future.
The deterioration of present living conditions (Ministry of Health and Welfare, “diffusionindex (DI) on present living conditions” in Figure 4-1) and the perception of present livelihood(Management and Coordination Agency, “DI on the perception of present livelihood”) in the
post-bubble period until 1997 has not been so significant compared with past recessions. It was
only in 1998 that the DI on present living conditions hit a record-low level regardless of the ageof householders for the first time since the survey began (householders under 60: -8.4% points,
householders over 60: 3.0% points).
As regards future perspectives, three characteristics are noted that have not been observed
before.
Figure 4-1. Present Living Conditions and Economic Perception of Post-retirement
Livelihood% points
80
DI on present living conditions
for householders over 60

60
40
20
0
DI on present living conditions
for householders under 60

-20
-40

DI on economic perception of post-retirement
livelihood for householders under 60

-60
-80
79

Notes:

Source:

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97 98 99
(survey year)

1. DI on present living conditions = share of households answering “affluent” + “ordinary” – “difficult.”
2. DI on economic perception of post-retirement livelihood = share of households answering “not worried” + “nocomment” – “worried.” However, there is a slight discontinuity in data as the questionnaire was modified in the
1992 survey.
Ministry of Health and Welfare, “Basic Survey on National Life;” Central Council for Savings Information, Bank ofJapan, “Public Opinion Survey on Savings and Consumption.”

Development Bank of Japan Research Report/ No. 4

23

First, for two consecutive years since 1996 consumers have expected future living standards
to decline, which has not happened before. Even in recession after the first oil crisis, the “DI on
the perception of future livelihood” (Figure 4-2) constantly showed that consumers expected
future living standards to be better than the present (i.e., ● exceeding ○).
Second, consumer confidence plunged to its lowest level in response to the sluggish
consumption since FY1997 and has yet to show strong recovery. Largely due to successive largescale bankruptcies in the financial sector since 1997, consumer confidence for six months ahead(Economic Planning Agency, “consumer attitude index” in Figure 4-2) dropped to the lowest
level since the period directly after the first oil crisis (36.5 in 1998). Among the components ofthe six-month prospect, indicators concerning “income growth,” “employment conditions” and“asset value” in particular have reached the lowest level ever, implying that the worsening
consumer environment has had an adverse impact on future prospects in the household sector.
Although the prospects of these three indicators started to improve in 1999, it has not regained
the 1997 level, illustrating the difficulty of recovery.
Figure 4-2. Perception of Present and Future Livelihood and Consumer Confidence
100

100
DI on perception of present livelihood

DI on perception of future livelihood

80
80% points

60

40

60
Income growth (right scale)20
40
Consumer attitude index

0

Asset value (right scale)
Employment conditions (right scale)20-20
68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99(survey year)

Notes:

Source:24

1. DI on perception of present livelihood (white circles) = share of answer “improved” + “unchanged” –“deteriorated.”
2. DI on perception of future livelihood (black circles) = share of answer “will improve” + “will remain unchanged” –“will deteriorate.”
3. Consumer attitude index:
Expected changes in “living conditions,” “income growth,” “price inflation,” “employment conditions” and“judgement on durable goods purchases” in six months are evaluated in five levels. The index is calculated as asimple average of the five components after converting the obtained data into a weighted average based on thecomposition of answers. A slight discontinuity exists as the survey method was modified in 1982. Annual data
represent a simple average of March, June, September and December surveys, except the 1999 figure, which
represents the March-June-September average. The survey on “asset value” started in June 1991 and concerns stock,land, etc.
Prime Minister’s Office, “Public Opinion Survey on National Life;” Economic Planning Agency, “Consumer Behavior
Survey.”Development Bank of Japan Research Report/ No. 4

Third, and most importantly, consumer sentiment toward the long term declined throughout
the 1990s. Consumer sentiment regarding the country’s future direction in general (Management
and Coordination Agency, “DI on Japan’s direction” in Figure 4-3) continued to deteriorate after
peaking in 1989 (50.6% points), reaching a record-low level (-44.4% points) in 1997. In particular,
consumer sentiment regarding Japan’s economic direction, which comprises three indicatorsconcerning health care/welfare, employment/labor conditions and government finance(Management and Coordination Agency, “DI on economic direction ②” in Figure 4-3) has
shown a greater fluctuation in the post-bubble period than the broader consumer sentiment,
which also comprises other economic indicators (Management and Coordination Agency, “DI on
economic direction ①” in Figure 4-3). While the improvement in the former exceeded theimprovement in the latter during the bubble economy, the deterioration in the former exceeds
the deterioration in the latter in the post-bubble period.
Figure 4-3. Japan’s Economic Direction% points
80

DI on Japan’s direction

60

40

20
DI on economic direction ②
0-20
DI on economic direction ①-40-60
71 72 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98(survey
Notes:

Source:1. DI on Japan’s direction = share of answer “right” + “do not know” – “wrong.”
2. DI on economic direction ① indicates a simple average of the share of answer “right” – “wrong” (multiple answers)
concerning “heath care/welfare,” “living environment,” “employment/labor conditions,” “land/housing” and“government finance,” among those who answered that Japan was moving in the right (wrong) direction. DI on
economic direction ② indicates a simple average of the share of answer “right” – ”wrong” (multiple answers)
concerning “health care/welfare,” “employment/labor conditions” and “government finance.” DIs on economic
direction ① and ② for 1998 do not strictly correspond with previous data, for all respondents were asked to list theitems moving in the right (wrong) direction. Also, it became impossible to calculate DI on Japan’s direction.
Prime Minister’s Office, “Public Opinion Survey on Social Awareness.”

Development Bank of Japan Research Report/ No. 4

25

Likewise, the perception of post-retirement life by the active population (Bank of Japan, “DIon economic perception of post-retirement livelihood for householders under 60” in Figure 4-1)
has been on a downward trend since the beginning of the 1990s (-27.4% points in 1992 and –68.2% points in 1999). According to the National Life Preference Survey for FY1998 conductedby the Economic Planning Agency, 73.0% of the population over 20 are worried about theirpost-retirement life, with half of them concerned about health and cost of living and 30% uneasy
about nursing care. Due to the concern about the deteriorating financial status of the government
caused by successive economic stimulus packages enacted since the collapse of the bubble
economy, combined with the uncertainty about pensions, health care and nursing care in Japan’s
aging society with a falling birthrate, consumer confidence is reacting sensitively to long-term
economic prospects.
In the final analysis, as consumption becomes increasingly responsive to business conditions,
it is urgently needed to improve the consumer environment, which has been exerting downward
pressure on consumption since the collapse of the bubble economy, rather than repeatedtemporary countermeasures, if consumption is to recover and lead the economy. The confidenceof consumers in their future livelihood must be restored by reassuring them that the various
problems of the aging society and falling birth rate, as well as stabilization of income andemployment conditions, will eventually be solved.
[Hiroaki Jindo <hijindo@dbj.go.jp>][Yohei Yamamoto <yhyamam@dbj.go.jp>]

26

Development Bank of Japan Research Report/ No. 4

[Appendix] Estimate of Human Assets
In section 2-2, we applied the adaptive expectation hypothesis to permanent income (i.e. wesupposed that more recent income has a larger impact on the formation of expected income). In
some cases, however, “human assets” is also considered as the explicit discounted present valueof one’s own future income.
Here, with certain conditions, we tried to estimate the explicit human assets as thediscounted present value of disposable income in future lifetime.
For example, Takayama et al. (1990) studied this kind of explicit human asset in Japan. Theirestimate considered human assets as lifetime wage in the future, lifetime business income in the
future, retirement benefits and public pension assets. In line with this concept, we calculate (i)lifetime wage, (ii) lifetime business income, (iii) lifetime public allowances (social security benefits
and social assistance) and (iv) lifetime public imposts.
Characteristically, Takayama et al. (1990) focused on the asset distribution in the household
sector. Estimating in terms of the attributes of households such as annual income, age, and net
asset strata, they primarily used individual data of the 1984 National Survey of Family Income
and Expenditure. On the other hand, in terms of calculating time-series macroeconomic data, weused individual data converted mainly from aggregate SNA statistics (1980-97) according to themethod described below.
Appendix Table 1 shows that the total value of human assets for all generations in 1984 by
Takayama et al. (1990) stood at ¥3,775 trillion and our estimate, which is slightly greater, at¥4,194 trillion. The main reason for the difference could be that the estimate of Takayama et al.
(1990) does not consider the human assets of single-member households, and those employees,
self-employed and family employees who are not household heads.
Our result also shows that in 1997 human assets amounted to ¥6,105 trillion. The value is
8.2 times greater than household net financial assets and 4.8 times greater than real assets. It canalso be observed that the slowdowns in lifetime income and lifetime public allowances as well as
the increase in lifetime public imposts have resulted in the leveling-off of total human assets.
Note that this estimated amount could fluctuate according to the assumptions of expectation
formation, and discount rate, etc.
Appendix Table 1. Comparison of Takayama et al. (1990) and Our Estimate on Human
Assets (as of 1984)(¥ trillion)
Age group

-24

25-29

30-34

35-39

40-44

45-49

50-54

Takayama et al. (1990)

37

250

602

769

663

509

395

Our estimate

665

537

580

583

513

401

329

Age group
Takayama et al. (1990)

55-59
278

60-64
168

65-69

70-74
72

7525

Total
7

3,775

Our estimate
249
336
4,194
Source: Takayama, Funaoka, Otake, Sekiguchi, Shibuya, Ueno and Kubo, “Jinteki Shisan no Suikei to Koteki Nenkin no
Saibunpai Koka – Futari Ijo no Futsu Setai-bun, 1984-,” in Economic Research Institute, Economic Planning Agency
ed. (1990) Keizai Bunseki No.118, etc.

Development Bank of Japan Research Report/ No. 4

27

<Method of estimating human assets>
1. The individual data of the four components of human assets are estimated as follows.
(i) Lifetime wage: We assumed that present employees expect to receive wages until they reach 60 according
to the cohort wage profile in each year (Basic Survey on Wage Structure), and to retire at 60 with lumpsum retirement benefits (Survey on Retirement Benefit Systems and Payments). On this assumption, we
calculated the present value of lifetime wage for individuals of each cohort, and then multiplied it by the
number employed in each cohort (Labor Force Survey).
(ii) Lifetime business income: We assumed that present self-employed and family employees expect toreceive the same amount of business income throughout their lifetime. On this assumption, we calculated
the present value of lifetime business income for individuals of each cohort, and then multiplied it by the
number of self- employed and family employees in each cohort (Labor Force Survey).
(iii) Lifetime public allowances: We derived the social security benefits of each household and each cohortfrom SNA, using the average amount of social security benefits by age (Family Income and Expenditure
Survey) as the weight. Then we calculated the present value of lifetime public allowances and multiplied itby the number of households in each group (Basic Survey on National Life).
(iv) Lifetime public imposts: We derived direct taxes, social security charges and indirect taxes of eachhousehold and each cohort from SNA, using the average amount of income tax payment, social security
payment and consumption expenditure by age (Family Income and Expenditure Survey) as the weights.
Then we calculated the present value of lifetime public imposts and multiplied the figure by the numberof households in each group (Basic Survey on National Life).
2. We supposed that all individuals expect to live until the age of 80.
3. The discount rate is (real long-term interest rate) - (real wage increase rate),
as real long-term interest rate = long-term prime rate - consumer price inflation,
real wage increase rate = wage increase in the spring labor offensive - consumer price inflation.
4. All data are converted into real terms using the final household consumption deflator.

Appendix Figure 1. Estimate of
Human Assets 1

Appendix Figure 2. Estimate of Human
Assets 2(¥ trillion)(¥ trillion)
4000

7000
6000

3000

5000

2000

4000

1000

3000

0

2000

-1000

1000

-2000

0
80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97(CY)
Earned income ①
Total ①＋②

Business income ②-3000
80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97(CY)
Social security benefits ③
Social security expenses ④
Total ③＋④

Income tax ④
Indirect tax ④

Sources: Economic Planning Agency “Annual Report on National Accounts”; Ministry of Labor ”Basic Statistical Survey on
Wage Structure,” “Survey on Retirement Benefit Systems and Payments,” “Condition of Spring Wage Increase”;
Management and Coordination Agency ”Annual Report on the Labor Force Survey,” “Annual Report on the Family
Income and Expenditure Survey,” “Consumer Price Index”; Ministry of Health and Welfare ”Basic Survey on National
Life”; Bank of Japan “Economic Statistics Monthly.”

28

Development Bank of Japan Research Report/ No. 4

Appendix Figure 3. Trend of Household Real-term Assets Including Human Assets(¥ trillion)
10000
9000

Non-financial assets
Net financial assets
Human assets

8000
7000
6000
5000
4000
3000
2000
1000
0
80

Note:
Source:

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97
(CY)

Non-financial assets and net financial assets are as at the end of the calendar year. Data are converted into real values
using final household consumption deflator (calendar year).
See Appendix Figure 1 and 2.

Development Bank of Japan Research Report/ No. 4

29

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31

List of Back Numbers (Including JDB Research Report)
No.4

Destabilized Consumption and the Post-bubble Consumer Environment (This Issue)

No.3

The Slump in Plant and Equipment Investment in the 1990s: Focusing on Lowered Expectations, the Debt
Burden and Other Structural Factors, January 2000

No.2

Survey on Planned Capital Spending for Fiscal Years 1998, 1999 and 2000, November 1999

No.1

Corporate Strategies in Japan’s Semiconductor Industry: Implications of Development in Other AsianCountries, November 1999

JDB Research Report
No.96

Recent Trends in the Japanese Economy: Focused on Fixed Investment and Capital Stock, August 1999

No.95

Efforts to Protect the Natural Environment in the United States and Germany: Environmental Mitigation
and Biotope Conservation, July 1999

No.94

Survey on Planned Capital Spending for Fiscal Years 1998 and 1999, June 1999

No.93

Towards the realization of ‘environmental partnership’: A survey of Japan’s environmental NPO sector
through comparison with Germany, June 1999

No.92

The Impact of Demographic Changes on Consumption and Savings, March 1999

No.91

Recent Research and Development Trends in Japanese Enterprises: Technology Fusion, March 1999

No.90

Recent Trends in the Japanese Economy: Prolonged Balance Sheet Adjustment, January 1999

No.89

Impact of Asset Price Fluctuations on Household and Corporate Behavior: A Comparison between Japanand the U.S., December 1998

No.88

Survey on Planned Capital Spending for Fiscal Years 1997, 1998, and 1999, December 1998

No.87

Foreign Exchange Rate Fluctuations and Changes in the Input-Output Structure, November 1998

No.86

Structural Changes in Unemployment of Japan: An Approach from Labor Flow, November 1998

No.85

Recent Trends in the Japanese Economy: Characteristics of the Current Recession, August 1998

No.84

R&D Stock and Trade Structure in Japan, August 1998

No.83

Survey on Planned Capital Spending for Fiscal Years 1997 and 1998, August 1998

No.82

The Significance, Potential, and Problems of DNA Analysis Research: Establishing Public Acceptance isEssential, May 1998

No.81

The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1996, 1997 and 1998
Conducted in August 1997, March 1998

No.80

Recent Trends in the Japanese Economy: Growth Base of the Japanese Economy, January 1998

No.79

Information Appliances: The Strength of Japanese Companies and Tasks for the Future, January 1998

No.78

Challenges and Outlook for the Japanese Machinery Industries: Impact of ISO14000 Series andEnvironmental Cost, January 1998

No.77

Current Conditions and Issues of Computerization in the Health Care Industry : For the Construction of a
Health Care Information Network, January 1998

No.76

Household Consumption and Saving in Japan, December 1997

No.75

The Direction of Japanese Distribution System Reforms: Strengthening the Infrastructure to Support
Diverse Consumer Choices, November 1997

No.74

Foreign Direct Investments by Japanese Manufacturing Industries and Their Effects on International Trade,
October 1997

No.73

The Impact of the Changing Trade Structure on the Japanese Economy: With Special Focus on the Effects
on Productivity and Employment, October 1997

No.72An Analysis of Foreign Direct Investment and Foreign Affiliates in Japan, August 1997

No.71

Recent Trends in the Japanese Economy: Stock Replacement and New Demand as Aspects of Economic
Recovery, August 1997

No. 70 Corporate Fundraising : An International Comparison, June 1997
No. 69 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1996 and 1997
Conducted in February 1997, May 1997
No. 68 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1996 and 1997
Conducted in August 1996, August 1997
No. 67 An International Comparison of Corporate Investment Behavior: Empirical Analysis Using Firm Date fromJapan, France and the US, April 1997
No. 66 Housing in the National Capital: Analysis of the Market for Housing using Micro Data, March 1997
No. 65 The Environment for Locating Business Operations in Major East Asian Cities, January 1997
No. 64 Direction of Reconstruction of Business Strategy in the Chemical Industry, January 1997
No. 63 Reflection on Discussions Concerning Regulation of the Electric Power Industry: Deregulation of theElectric Power Industry in Japan and Implication of Experiences in the United States, December 1996
No. 62 Current Status and Future Perspective of the Japanese Semiconductor Industry, November 1996
No. 61 A Breakthrough for the Japanese Software Industry?: Responsiveness to Users’ Needs is the key, October
1996
No. 60 Recent Trends in the Japanese Economy Focusing on the Characteristics and Sustainability of the Current
Economic Recovery, September 1996
No. 59 Analysis of the Primary Causes and Economic Effects of Information: Related investment in the UnitedStates and Trends in Japan, August 1996
No. 58 Selected Summaries of Research Reports: Published in FY 1995, June 1996
No. 57 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1995 and 1996
Conducted in February 1996, May 1996
No. 56 Recent Trends in the Japanese Economy, May 1996
No. 55 Issues Concerning the Competitiveness of the Japanese Steel Industry, February 1996
No. 54 Changes in the Financial Environment and the Real Economy, January 1996
No. 53 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1994, 1995 and 1996
Conducted in August 1995, October 1995
No. 52 Current Economic Trends: Focusing on the Appreciation of the Yen and its Effects, October 1995
No. 51 Problems Concerning the International Competitiveness of the Petrochemical Industry, October 1995
No. 50 An Economic Approach to International Competitiveness, October 1995
No. 49 Selected Summaries of Research Reports Published in FY 1994, July 1995
No. 48 Strategies for Improving the Efficiency of the Japanese Physical Distribution System: Part2, July 1995
No. 47 Issues on International Competitive Strength of the Auto Industry, June 1995
No. 46 Problems Concerning the International Competitiveness of the Electronics and Electric Machinery Industry,
June 1995
No. 45 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1994 and 1995
Conducted in March 1995, June 1995
No. 44 Strategies for Improving the Efficiency of the Japanese Physical Distribution System, March 1995
No. 43 Capital Spending Recovery Scenario Cycle and Structure, August 1994
No. 42 Progress of International Joint Development between Industrialized Countries on the Private Level, May 1994

No. 41 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1993, 1994 and 1995
Conducted in August 1994 , November 1994
No. 40 Selected Summaries of Research Reports Published in FY 1993, June 1994
No. 39 Recent Trends in Japan’s Foreign Accounts, April 1994
No. 38 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1993 and 1994
Conducted in March 1994, April 1994
No. 37 Economic Zones and East Asia Prospect for Economic Activity Oriented Market Integration, December
1993
No. 36 Japanese Corporate Responses to Global Environmental Issues, December 1993
No. 35 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1992, 1993 and 1994
Conducted in August 1993, September 1993
No. 34 Structure of Profit to Capital in the Manufacturing Industry, September 1993
No. 33 Comparison of the Japanese and The U.S. Labor Markets, October 1992
No. 32 The Relative Competitiveness of U.S., German, and Japanese Manufacturing, March 1993
No. 31 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1992 and 1993
Conducted in March 1993, April 1993
No. 30 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1991, 1992 and 1993
Conducted in August 1992, December 1992
No. 29 Flow of Funds in the 80s and Future Corporate Finance in Japan, November 1992
No. 28 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1991 and 1992
Conducted in February 1992, April 1992
No. 27 An Analysis of Foreign Direct Investment in Japan, March 1992
No. 26 Projection of Japan's Trade Surplus in 1995: Analysis of Japan's Trade Structure in the 80s, February 1992
No. 25 Intra-Industry Trade and Dynamic Development of The World Economy, November 1991
No. 24 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1990, 1991 and 1992
Conducted in August 1991, September 1991
No. 23 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1990 and 1991
Conducted in February 1991, March 1991
No. 22 Trends of the Petrochemical Industry and its Marketplace in East Asia, March 1991
No. 21 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1989, 1990 and 1991
Conducted in August1990,September 1990
No. 20 Deepening Economic Linkages in The Pacific Basin Region: Trade, Foreign Direct Investment andTechnology, September 1990
No. 19 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1989 and 1990
Conducted in February 1990, March 1990
No. 18 Petrochemicals In Japan, The US, and Korea an Assessment of Economic Efficiency, February 1990
No. 17 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1988, 1989 and 1990
Conducted in August 1989, October 1989
No. 16 Impact of the EC Unification on Japan’s Automobile and Electronics Industries, August 1989
No. 15 Industrial and Trade Structures and the International Competitiveness of Asia’s Newly Industrializing
Economies, August 1989
No. 14 The Japan Development Bank Reports on Capital Investment Spending: Survey for Fiscal Years 1988 and1989 Conducted in February 1989, March 1989

No. 13 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1987, 1988 and 1989
Conducted in August 1988, September 1988
No. 12 Growing Foreign Investors’ Activities and the Future of Internationalization, September 1988
No. 11 Futures Tasks and Prospects for the Japanese Machine-Tool Industry, July 1988
No. 10 International Division of Labor in the Machine Industries Among Japan, Asia’s NICs and ASEANCountries, June 1988
No. 9

Trends of the Petrochemical Industry and its Marketplace in East Asia around Japan, May 1988

No. 8

The International Competitiveness of Japan and U.S. in High Technology Industries, April 1988

No. 7

The Japan Development Bank Reports on Private Fixed Investment in Japan, March 1988

No. 6

Economic Projections of the Japan’s Economy to the Year 2000, February 1988

No. 5

The Japan Development Bank Reports on Private Fixed Investment in Japan, September 1987

No. 4

Current Trends in the Japanese Auto Parts Industry in Overseas Production, July 1987

No. 3

Current Moves for Foreign Direct Investment into Japan, May 1987

No. 2

Overseas Direct Investments by Japanese Corporations, May 1987

No. 1

Current U.S. Consumption Trends, May 1987