Macroeconomics And Macroeconomics Individual Assignment

772 Words Aug 27th, 2014 4 Pages
Macroeconomics Individual Assignment 1
Wil Creasy

Part A

Since the beginning of the 1990s, Japan has experienced significant declines in household net savings rates. The 90’s was a decade of slow growth, and households devoted a large portion of their incomes to maintaining consumption levels. “Large amounts of liquid savings in postal savings accounts and in banks meant the majority of the population did not feel they had to increase saving in order to rebuild assets.” (Feldstein, 2010)
A number of factors contributed to this decline in the savings rate. One such factor is that demographic structure is changing rapidly. There is an increasing number of retirees relative to the people within the labour force. The people in the labour force are in a critical stage of saving within their lives. According to the life cycle theory of consumption, consumers save at different stages in their life in order to provide for themselves in later years.
Furthermore, the problem of increasing liquidity constraints has led to declining savings rates in Japan. “When life cycle savers are trapped in this position, possibly via unemployment, their savings drop.” (Ogawa, 2011)
A change of lifestyle of much of the Japanese population, has led to them spending larger amounts of their income in current stages of their life. According to the inquiry survey conducted by the Japanese government, there has been a growing tendency since 1987 for Japanese people to place much more value on their…
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