Life-Cycle Savings and Public Policy

As is obvious, the SSW includes a component of intergenerational transfers.

If we assume that the market rate of return from investment was 5.5% in nominal

terms per annum, and that the discount rate for the future SSW will be 4.0%, then,

the estimated SSW will go up to ¥50.92 million (E324,000 [1998 constant]). This

figure is rather common to the Japanese. Consequently, the component of

intergenerational transfers in the SSW will turn out to be as much as ¥29.13

million (E185,600 [1998 constant]), in this case (see Figure 5.19).

5.9 CONCLUSION

This chapter confirms that most findings in Takayama and Kitamura (1994) are

still valid. These include (1) variations in saving behavior across different income

classes are muc h wider than those over the age profile within the same income

class; (2) as income grows and wealth accumulation increases, richer households

save at increasingly high rates over the age profile; and (3) diversity of saving

behavior among elderly households is much greater than among younger house-

holds, as their employment status, homeownership, and financial asset holdings

differ substantially. The richer elderly households keep saving at significantly

positive rates.

In this sense, the bottom line of the household saving behavior remains the

same after the burst of the bubble economy in the early 1990s.

Our new findings are as follows:

1. The cohort analysis indicates that the saving behavior follows, more or less,

the same pattern of that of cross-sectional observations in respective years. The saving

FIGURE 5.19 Social security wealth over life cycle.

5.9 Conclusion 201