Empirical Analysis of Precautionary Savings in Japan

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Most of the past studies on the precautionary savings have been qualitative. This is a quantitative study on the precautionary savings in Japan. Precautionary savings have two components. One is motivated by the consumer's attempt to reduce the volatility of future income caused by uncertain inflation or involuntary unemployment. This part is called cyclically precautionary savings. The other is provision after retirement. This is more structural and depends on the population structure and the pension system. We analyzed these two types of precautionary savings from two standpoints. One is an investigation of the Survey of Public Opinions on Savings conducted by the Bank of Japan. According to this survey 70-80 % of surveyed respondents save for rainy days. As for the structurally precautionary savings, they are increasingly recognized as important by the respondents in recent days. The other focuses on the cyclically precautionary savings. An attempt was made to measure the effect of income risk on the cyclically precautionary savings from the survey data of workers' households and farmers' ones.Our findings are as follows. The income risk of farmers is larger than that of workers. The proportion of precautionary parts out of total savings for farmers is also larger than that for workers. The time paths of the calculated precautionary savings have peaks soon after the first oil crisis for both workers and farmers. The magnitude of precautionary savings has become negligible for workers since then, while it has been still large for farmers.