The household savings rates of Japan and S. Korea are near all-time lows, and near the bottom among members of the OECD, a dramatic reversal from historical rates, according to OECD data.
For 2012 Japan’s household savings rate, as a percentage of disposable household income, is projected to be 1.9% while S. Korea’s is 2.8%. These are among the lowest among reporting members of the Organization for Economic Cooperation and Development (OECD), above only Denmark (0.6%), Finland (1.7%) and, in Korea’s case, Hungary (2.4%).
Japan’s savings rate is projected to continue sliding to 1.5% in 2014 while S. Korea’s is expected to rebound to 3.3% by then.
By comparison the 2012 savings rates are projected to be 16.2% for France, 13.2% for Switzerland, 10.1% for Germany, 8.9% for Australia and 3.7% for the US and 3.5% for Canada. The US rate is expected to decline to 2.7% by 2014.
China, which is not a member of the OECD, has by far the world’s highest national savings rate. It is estimated to be around 50% when its inordinately high governmental and corporate savings rates are included. Among China’s urban households the savings rate was estimated to be 29% in 2009, up dramatically from 18% in 1995.
China’s trend is a mirror image of those of Japan and S. Korea which had two of the highest rates among OECD members in 1990 when reasonably reliable data began to be collected. S. Korea’s 1990 household savings rate was 22.5%. It peaked at 24.9% in 1998 before beginning its precipitous decline during the following decade.
Japan’s, which had been in the 30-35% range in the 1970s, had already declined to 13.9% by 1990. It rose briefly to 15.0% in 1991, then began a steady decline to today’s levels.
By comparison the US household savings rate was 7.0% in 1990, rose to a quarter-century high of 7.9% in 1992, then began declining to a low of 0.4% in 2006 and 2007 before climbing back up to today’s levels over anxiety brought on by the financial crisis of 2008.
The only developed nation to approximate the household savings rate trajectory of Japan and S. Korea is Italy. It posted a rate of 21.7% in 1990 before beginning a steady decline to 4.4% in 2012.
While a high savings rate is generally considered a positive indicator of a nation’s economic health, an inordinately high rate like China’s is seen as a symptom of insecurity over the lack of a social safety net. China’s government has been striving to bring down the nation’s household savings rate to help drive domestic consumption.
