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Consider Japan

Chapter X

Savers like the Swiss?

It is often said that one of Japan’s greatest advantages has been that its people are almost unnaturally heavy savers, and there have been many expressions of admiration and wonder that a people with an average personal income of nominally only about two-fifths of Britain’s per head apparently voluntarily saves up to 20 per cent of it. But some of the statistics often quoted are rather misleading, or are very heavily affected by circumstances very peculiar to Japan. For example:

(1) The huge number of small businesses in Japan means that the figures for personal savings will include all capital newly invested in those businesses in any one year: sometimes this new “capital” has been most involuntarily invested, as when, during a credit squeeze, the small man has had an even higher proportion than usual of his initial bills paid by bigger firms only in promissory notes.

(2) The fact that the average wage earner gets so large a part (sometimes a third) of his annual wage paid as a Christmas bonus means that he holds that bonus for spending spread over the year; it is largely for this reason that so many even of the poorer households open savings accounts at the banks. No doubt this banking habit in itself leads to an increased habit of genuine saving, but when the bonuses given each Christmas are much bigger than those given the Christmas before – as has happened in every recent year of expansion – it is automatic that the total of savings deposits as recorded on each December 31st should be much bigger too.

(3) While employers’ fringe benefits in the West often take a form (e.g., pensions schemes) which do some of the worker’s saving for him, fringe benefits in Japan often consist of doing or subsidising some of the worker’s spending for him (paying his railway fares, cheap company shops) and leaving him to save for his old age himself, Such pensions as the worker gets often consist of terminal pay of his salary in a block sum for a certain period ahead, leaving him to save and spread this block sum over what he guesses will be the remainder of his life. Once again, this increases the nominal figure for “personal savings” in the national income accounts.

(4) A large number of the women in the labour force get most of their board and lodging paid for them by their employers and are saving the greater part of their wages as a dowry for when they get married. (Very few married women, incidentally, go out to work.)

(5) Hire purchase has been relatively slow to get moving in Japan (partly because of high interest rates, partly because of social problems connected with organising it), so that over 50 per cent of consumer durables are bought with money which has first been saved up and is then paid cash down; in future the proportion financed by h.p. is certain to grow.

When allowance is made for all this, a certain haze of healthy cynicism is perhaps thrown over the theory that Japan has prospered because of “the great natural thriftiness shown by its people.” The huge proportion of between 35 and 40 per cent of its gross national product which has been taken up in recent years by total investment (which necessarily equals total savings) is largely explained by another factor: namely the fact that (although, once again, properly comparative figures are desperately difficult to work out) about a tenth of the national income which in Britain would have gone to wages or other personal incomes has in Japan recently been going to company profits instead. To the doctrinaire left-winger, this will seem a shocking proof that the capitalists are too greedy, and the trade unions insufficiently powerful, in Japan. To the more pragmatic economist, the proper observations seem to be:

(1) Because companies have been ploughing back these high profits during a golden age of high investment, the Japanese worker has gained more in this last decade from this greater growth in the national cake than he would have done if he had got a larger share of the national cake immediately.

(2) As a matter of fact, the slower relative growth of wage bills than of profits has not been primarily due to the weakness of trade unions. It has been much more greatly due to the facts that the new and most profitable industries have mostly been built up with new and young labour forces; and it is a custom of the country (which the trade unions themselves appear to support) that young regular employees expect to get a much lower wage than older regular employees in Japan.

As the average age of the labour force in these new industries grows older, more of the national income should go to wages and less to profits; because a smaller proportion of wages than profits is saved, this should mean that consumption will gain somewhat at the expense of investment. We have already suggested that, after its age of high investment, Japan is one of the few countries in the world where such a switch from investment to consumption would now probably be a switch in the right economic direction.