Quarterly Review 1321

Is Japan's Saving Rate High?

Fumio Hayashi

Spring 1989

There are two major differences between Japan and the United States in the way saving is calculated in their national accounts. First, depreciation in Japanese national accounts is based on historical costs, which leads to an understatement of true depreciation and hence an overstatement of net saving. Second, government capital formation is not included in U.S. saving. This article adjusts the official Japanese saving numbers by evaluating depreciation at replacement costs and excluding government capital formation from saving. Doing so significantly reduces the apparent gap between the national saving rates of the two countries. Since 1970 Japan's national saving rate has been declining to the stationary U.S. rate. This trend, however, has been reversed in recent years. In contrast, Japan's wealth-to-income ratio (excluding land), after declining in the late 1950s, has been rising toward the U.S. ratio and has reached the U.S. level in 1987.

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