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Contents Introduction

This paper analyzes the impact of the age structure of the population on the household saving rate using time-series data for Japan for the 1955-2019 period. It finds that there is a cointegrating relationship between Japan’s household saving rate and her dependency ratio (the ratio of the dependent population to the working-age population) and that the latter has a negative and statistically significant impact on the former. This implies that the life-cycle model applies in the case of Japan, that trends over time in the age structure of Japan’s population can largely explain trends over time in Japan’s household saving rate, that the downward trend in Japan’s household saving rate since the mid-1970s can largely be explained by the aging of her population, and that further population aging will lead to further declines in Japan’s household saving rate, most likely into negative territory, in future years.