Frugal Japanese Dig Into Savings
By KEN BELSON
nytimes.com
OKYO, May 27 — In more prosperous times just a few years ago, Kiwako Kaiyama and Kiyoko Kitamura looked to a future of kicking back on their husbands' salaries. Instead, to make ends meet, the 40-something housewives have had to cut their spending, take part-time jobs and — shockingly, for Japan — dip into their savings.
For decades, the Japanese routinely socked away 10 to 20 percent of their incomes, earning a reputation as one of the world's most frugal people. In those years, Japan badgered the United States about its wasteful ways and trade deficits, even as Japanese companies benefited from selling Americans cars and electronics.
But a decade of recession here and a rapidly aging society are changing all that. Japan's household savings rate fell to a postwar low of 6.9 percent in 2001, the last year for which complete figures are available, from 11 percent in 1999 and 14 percent in 1990.
Based on preliminary data, the savings rate fell another two percentage points in 2002, economists said. Within a decade, if current trends persist, Japan's savings rate will hit 1.5 percent, according to HSBC Securities, pushing it below America's, which rose to 3.7 percent in 2002.
This reversal of fortune for the world's two largest economic powers could have far-reaching consequences. For Japan, already the most heavily indebted nation in the developed world, the declining savings pool could lead to higher interest rates, making it harder to finance the debt.
Japan also helps America finance its debt by purchasing United States Treasury bonds. As Japan's savings shrink, it will have less money to export, which might push up American interest rates as well.
While economists can offer numerous technical explanations for Japan's declining savings rate, the reasons are clear enough to Ms. Kaiyama, 47.
Sitting around a snug kitchen table with her 52-year-old husband, Naoyuki, and his elderly parents, she cataloged the economic uncertainties between sighs and sips of tea. Taxes are rising, wages are falling, health benefits are being slashed and, most worrisome of all, Mr. Kaiyama's job and pension at an electronics maker are no longer safe.
"Every day, I wonder whether my husband's company will go under," she said uneasily. "Money just seems to drain away."
Some of the erosion in Japan's savings rate was inevitable. In the postwar era, Japan benefited greatly from a young and expanding population, which helped to expand both growth and savings rates. Today, more Japanese are reaching retirement age and are dipping into their savings accounts to pay for everyday costs, a trend expected to continue.
By 2010, more than 22 percent of Japan's 127 million citizens will be at least 65 years old, up from 17 percent just three years ago. By 2015, the elderly will outnumber the young, because of a record low birthrate. With interest rates near zero and life insurance companies cutting payouts, pensioners are already having a harder time.
Working families, suffering from economic stagnation and deflation, are also saving less. That is what Mrs. Kitamura, who works part time in a bank, has been forced to do. The salary of her husband, a Tokyo city employee, has been cut, something previously unheard of. With home loan payments piling up and a third child in school, "our savings are down to zero," she said.
To cut corners, the Kitamuras have given up on eating out and pack lunch boxes to take to work. Like other Japanese, they are spending less on cars, homes and other big-ticket items. A higher percentage of income now goes to ordinary things like food, clothing and education.
"People are hanging on, not letting their hair down," Chris Walker, an economist at Credit Suisse First Boston in Tokyo, said, referring to the declining savings rate. "If things continue as they are, Japan will subside toward a middle-income country."
Mr. Walker's pessimism stems from Japan's national debt, which is 150 percent of gross national product, highest among the major industrialized nations. Though the government can issue bonds indefinitely, sooner or later it has to pay them back. Assuming the economy grows at 1.5 percent a year over the next decade, as the government expects, lawmakers will have to raise taxes, commandeering even more of the country's savings.
That process is already under way. In April, the government raised the portion of medical costs salaried workers have to pay, to 30 percent from 20 percent. On a recent visit to have his ears checked, Mr. Kaiyama discovered that the cost of his medicine had increased by 50 percent. Worse, the government's new tax formulas will substantially reduce Mr. Kaiyama's annual bonus — worth five months' pay to the typical Japanese workers.
Together, the measures will extract 2.5 trillion yen, $21 billion, from consumers' pockets.
"With these extra increases, the burden on me just gets heavier," Mr. Kaiyama said.
The possibility of more tax increases, which the government is discussing, has led the Kaiyamas to buckle down. Every morning, Ms. Kaiyama scans the newspapers in search of bargains, riding 15 minutes out of her way by bicycle to track down cheaper vegetables.
Vacations, never extravagant, are now limited to sleepovers at a resort near Mount Fuji owned by her husband's company. To help pay for her two daughters' education, she works four days a week at a local grocery.
"I cannot put the burden only on my husband," she said.
Mr. Kaiyama, a personnel manager, is among the legions of "salarymen" who are being pushed to retire early so companies can trim their bloated payrolls. In Japan's seniority-based system, he cannot hope to get a new job that pays as much. So he hangs on, hoping to reach the mandatory retirement age of 60.
The government's prescription for its woes is higher taxes. To keep the health care system afloat, lawmakers are considering forcing those aged 75 and older to pay for 10 percent of their medical costs, while those from 65 to 74 would pay 20 percent.
Others favor a different approach. Keidanren, Japan's largest business lobby, wants to more than triple the national sales tax, to 18 percent, over the next dozen years. This way, it reasons, the entire nation can share the burden of paying for the elderly, not just working families.
The trouble is that a tax on nearly every transaction in the economy could set off another recession, like in 1997, when the consumption tax was raised to 5 percent from 3 percent. This would force consumers to use even more of their savings to make ends meet, economists said, increasing their uneasiness.
While Americans have been known to take to the streets or vote their representatives out of office, Japanese are more resigned about their plight. Openly discussing personal woes is less common in Japan, and with the Liberal Democrats in power for almost five decades, many voters have given up going to the polls.
"I can't trust the politicians to solve these problems," Ms. Kitamura said.
So she and her family, like the Kaiyamas, are learning to adjust their expectations. No grand trips to Hawaii or fancy dinners on the town. No guarantees that their husbands' jobs will be enough to retire on. Most of all, no big savings account to fall back on if times get tougher. |
