Japanese households save about 20 per cent of their income, an unusually high rate. Although cultural factors are often cited as a reason for their propensity to save.the high saving rate is a relatively recent phenomenon; the Japanese were not especially big savers prior to World War II. Why do the Japanese save so much?
Among the reasons for saving, life-cycle reasons are clearly important in Japan. The Japanese have long life expectancies,and many retire relatibely early. With a long period of retirement to finance, Japanese families must save a great deal during their working years.
Second, land and housing prices remain extremely high in Japan compared to other countries. In addition, down payment requirements are typically quite high. Young people must therefore save a great deal or borrow their parents'savings to buy their first homes in Japan.
Precautionary saving is probably lower in Japan than in some other countries, however,although Japan's recent economis troubles have reduced the pratice of lifetime employment, Japanese firms still make extensive use of the system,which essentially guarantees a job for life to works who join a firm after graduating from university. This type of job security,coupled with Japan's tranditionally low unemployment rate, reduces the need for precautionary saving.
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