Bank balance

PUBLISHED : Saturday, 20 December, 2003, 12:00am
UPDATED : Saturday, 20 December, 2003, 12:00am

Talking to a group of college students in Tokyo recently, I told them that the Japanese used to save 20 per cent of their income. They could hardly believe me.

Young Japanese are not as interested in saving money as their parents and grandparents used to be.

Japan's savings rate was, famously, the highest among the industrialised nations for a long time - standing at 20 per cent in the 1970s and 14 per cent only 10 years ago. Saving was a way of minimising anxiety about the future in a country with inadequate welfare and pension programmes. As a result, the nation boasted, until recently, that its consumers had accumulated cashable assets of 140 trillion yen (HK$10.1 trillion).

According to the government's calculations, the ratio has dropped rapidly year after year in the past 10 years, to 6.9 per cent in 2001-2002, the year Germany and France maintained ratios of more than 10 per cent. Some economists say now it could have slumped as low as 5 per cent, and Japan could be a country of spendthrift consumers just like the United States.

It is easy to imagine that, with less disposable income in Japan's decade-long recession, people simply can no longer afford to save. Or that they have been unable to change their pre-recession consumption habits quickly enough, and have eaten into existing savings.

Saving is no longer psychologically comforting, either. The tax system removed the saver-friendly exemptions that once encouraged people to produce a big pool of money to slumber in banks. With the nearly zero per cent interest rates offered today, people see little merit in savings accounts.

At the same time, young Japanese are showing an unprecedented interest in investing their money. The day after I spoke at the university, I noticed on one university website a students' call for peers to join his investment club. And more and more people are moving their cashable assets to markets abroad.

Soon the post-war baby boom generation will be joining the ranks of retired senior citizens, who already make up 20 per cent of all Japanese households.

Young people have different reasons for being apathetic about savings. The young - particularly those aged between 15 and 24 - face higher unemployment than other generations. By choice or not, they tend to work at low-paying part-time jobs, and accumulating savings is not even an option for them.

Japan can be seen as undergoing a grand experiment to learn how a historic decline in bank savings will affect the nation's economy.