Why Is Japan's Saving Rate So Apparently High?

This article begins with a look at time-series data on aggregate saving for the United States and Japan. After showing that a resolution of conceptual differences substantially narrows the gap in the saving rates between the two countries, the article examines various explanations for Japan's high saving rate by confronting them with a wealth of tabulations from household surveys in Japan. The life-cycle explanation is found to be inadequate. The prevalence of the extended family and bequests are singled out as probably the most important factor contributing to higher saving. An attempt is made to estimate the flow of intergenerational transfers. It is argued at the end that Japan's recent large trade surplus is due more to her slumping investment than any increase in saving.