Research Briefing | Jul 11, 2023

Japan: Covid-era ‘excess’ savings may be smaller than estimated

Japan: Covid-era ‘excess’ savings may be smaller than estimated

We think that a dissaving-driven consumption boom is unlikely to happen in Japan. Excess savings accumulated during the pandemic, in our view, is smaller than generally thought, and the withdrawal savings will be limited going forward.

Based on the pre-Covid average savings rate, Japan’s excess savings is an estimated 10% of GDP, second largest after the US. Unlike the US, Japan’s excess savings have barely been touched.

What you will learn:

  • However, we believe that the size of Japan’s excess savings is overestimated given the trend rise in the savings rate in the late 2010s. 
  • We think the rise in savings rate is structural and will continue. First, poor income prospects and heightened concerns about the sustainability of the social security system promote precautionary saving. Second, rising labour participation and changes in the household income structure encourage saving.
  • A consumption boom financed by the withdrawal of excess savings will not happen because the need for precautionary savings will increase even further in the coming years. Plus, excess savings tend to be concentrated in higher-income households.
Back to Resource Hub

Related posts

Post

Acceleration in digitalisation will keep a service trade deficit in Japan

We project Japan's services trade balance will remain in deficit over the coming years as a trend increase in the import of digital-related services will outweigh a rising travel services surplus that has been driven by inbound tourists.

Find Out More
japan street

Post

BoJ on hold ahead of wage negotiation results

The Bank of Japan left both short-term and long-term policy rates unchanged at Tuesday's meeting as widely expected. The BoJ was unlikely to change policy this time given the lack of clear evidence on Spring Negotiation pay rises, based on recent comments by the Governor.

Find Out More
Asian worker in factory, supply chain

Post

The Deglobalisation Myth: How Asia’s supply chains are changing

Despite talk of deglobalisation, a quantitative analysis of intermediate goods show global supply chains have continued to expand in the last five years. Amid a volatile world economy, swiftly evolving supply chains are minting new winners and losers in global trade.

Find Out More