I think that the Japanese pension system is more generous than we realize, but the crucial point here is that exactly the same sort of issues would apply to the U.S. Many of our elderly are living off of interest, and certainly can't rely upon their children. Nor are pensions necessarily very generous, particularly if you're in a high-tax and high-utility cost part of the country where a blip in real estate and heating costs can wipe out one's income stream.
So it's not clear that this should boost Japanese savings more than it would U.S. savings.

Note that there's a book just out from UMich edited by Tachibanaki on savings, all of it done in a comparative framework. There is also a 1994 NBER volume (UChicago Press) edited by James Poterba entitled Public Policies and Household Saving, with essays on the US, Canada, UK, Germany, Italy, Japan and France. A quick glance through it didn't show ANY math or econometrics -- unlike most NBER volumes, this one can be read by a non-specialist. (I glanced through the Japan chapter -- no suggestion that pensions stand out as unusual, but the elderly save more in Japan than the US, a well-known but not yet well-understood anomaly since intuition suggests that we dissave in our old age.)

W&L Lexington VA 24450
MSmitka[atx]wlu.edu
Fax (703)463-8639
Tel (703)463-8625

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Date: Fri, 7 Jul 1995
From: "Anthony M. Miyake"

First, although interest rates are low in Japan, due to deflation the money in savings accounts now has greater purchasing power than before.

Second, in an earlier post I referred to the article by Robert Barro called "Are Government Bonds Net Wealth?" which discusses social security among other things. Social security, however, is used to explain why savings rates are lower than they would be without them. Thus, if differences in SS were the only cause for the different savings rates between Japan and the US, then Americans actually do save as much as the Japanese but the SS system is doing some of that savings for them which is why we see the difference.

Third, interest rates on savings in Japan were never that high to begin with. At least there's a lower bound at zero.

A. Miyake
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