Japan’s household savings

Source: Claus Vistesen

Source:  Claus Vistesen

I think this data shows that the declining net savings rate is reflected in the deceleration of growth in household balance sheets shown in the first chart.  The recent steepening of the decline in the net savings rate would logically be driven by an increase in retirees/unemployed relative to the workforce.

Extrapolating the net savings rate forward would indicate crossing into negative territory in the next year or two if this has not already occurred.    The resultant draw down of assets will be gradual.  Claus Vistesen suggests that Japan’s corporate sector may be able to fill the government’s debt funding gap resulting from the household saving rate reaching zero.  I am a bit skeptical;  one possible offset to the retained earnings on corporate balance sheets might be cross shareholdings which may not be marked to realistic values; due to either not marking them to exchange prices or simply the fact that Nikkei share prices are actively propped up by Japan’s financial authorities.

Also, If a substantial portion of Japanese corporate assets are invested in US Treasuires, for example, which seems quite likely, corporations would have to sell Treasuries in order to shift the proceeds into Japanese government bonds.  This  would have the effect of strengthening the yen relative to the dollar. This is a result that the finance authorities would clearly rather not see. I suppose that corporations could simply hand over the actual securities as payment for such a tax, but again the Ministry of Finance would need to sell those to obtain yen.

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