A lot of the postings here have been on *why* instead of *how* the Japanese save so much.

By the way the question was worded, it seemed to ask how (instead of why) the Japanese manage to exercise so much fiscal responsibility on the household level.

This brought to mind the presentation of a paper last year. The title is "Saving and Growth with Habit Formation" by C. Carroll, J. Overland, and D. Weil. The general idea of the paper is that high growth can lead to high savings instead of the commonly held opinion that high savings leads to high growth. As consumption adjusts slowly through habit formation, high growth causes people to increase consumption only a little which leads to increased savings.

In this framework, the answer to the question would be that fiscal restraint is developed through habit. This seems especially applicable to the older Japanese who grew up in a Japan which is completely different from that of today.

This raises the issue of whether it was high savings which contributed to Japan's high growth or the other way around. Does anybody know of any studies which tried to determine which Granger-caused which?

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Anthony M. Miyake