Unlocking Japan’s baby boom savings

WHILE Japan’s leaders like to argue that the country is poor and complain about the “lost decades” – or even the “lost generation” – the macroeconomic reality is that Japan is the world’s largest creditor country and has been for the last 31 years. So much for “lost decades”.

Japan’s total net assets stood at US$3.2 trillion at the end of 2021 (and almost certainly rose again in 2022 – the latest available data is for end-2021). This was 1.3 times more than those held by Germany, the world’s No 2 creditor, and was well ahead of China. Japan is a very rich country. Its stock of assets is the envy of the world.

Unfortunately, being rich in financial assets does not mean that the assets are being deployed effectively. In the household sector, financial assets have basically doubled from the equivalent of one quadrillion yen (S$9.73 trillion) to two quadrillion yen over the past 30 years. This asset doubling happened while wages and disposable income were basically stagnant, and income from those assets dropped from 40 trillion yen in 1994 to 25 trillion yen in 2022.