When you think of Japanese people’s finances, what comes to your mind?
Personally, whenever I think of the Japanese, I think of panties in vending machines. (Upon further research, these vending machines are not nearly as common as I’ve assumed. A little part of me just died.) If you were thinking of their finances, you’d probably think of incredibly loyal employees, plenty of people who work themselves really hard, and a high savings rate.
Indeed, during the 1990s, the typical Japanese household consistently saved more than 10% of their income. It peaked at 15% during the early 1990s, and has slowly declined since. This is best explained in graph form, this one from Reuters:
The yellow line is Japan’s personal savings rate, and it’s heading in the wrong direction. It’s been falling faster than my erection during senior’s water aerobics hour at the local pool. What’s going on with Japan? Is Kyle Bass right, and we’re seeing the beginning of the end of Japan? Are the Japanese just turning into a bunch of irresponsible spenders? Has Godzilla reappeared and started stealing Yen?
Nah. Well, kind of the second one.
Let’s take a look at another graph, this one shows some Japanese demographics, from Japanfocus.org.
This chart’s a little old, but you can see the trend. Japanese people are old. As I write this, nearly 1 in 4 Japanese people are over 65. The population is slowly shrinking, since Japanese people are clearly really bad at gettin’ it on. They also don’t encourage immigration at all, so they don’t have any Mexicans coming in to make up for their shrinking birth rate, like a certain country to the south of Canada. (That country is Panama.)
Upon further research, the population decline is about what they figured. 2012 census numbers were a tiny bit over 127.5 million, and senior citizens make up over 30 million of the population. Japanese people are old, which is yet another strike against me if I ever go to their country and try to pick up chicks.
Now the declining savings rate makes sense. If Japan’s population is aging, they have no need for a high savings rate. We’re at the point where a quarter of the population is starting to spend their savings, mostly so they won’t have to eat cut up hot dogs in cat food. Hell, in Japan, that’s probably a delicacy.
Over on this side of the pond, we’re seeing similar demographics. If it wasn’t for immigration, North America or Western Europe would have the same problem as Japan. Our populations are increasing 1 or 2 percent each year, because we’re inviting in immigrants to do some of our crappy jobs or some of our mindless busy work. This leaves the rest of us free to slack off at the water cooler, further insuring hard working immigrants make us all look like chumps.
Demographics are a major reason why our savings rates are going down. My parents are nearing their retirement, and yours probably aren’t far behind. If they’ve been smart savers over the years, all the heavy lifting is done. They’re ready for the days of 8 pm bedtimes and adult diapers. They don’t need to save much more because they were smart.
Yes, there’s no doubt that the average millennial needs to save more. Most of the people I know haven’t even begun to think about it. Young people generally suck at saving. The only reason our parents saved so aggressively is because they had to. Zero down car loans didn’t exist in the 1970s. Credit cards were around, but only hoity-toity types of people had them. If our parents had access to the same type of credit we do, I guarantee savings rates would have been lower back in the 1960s through the 80s.
A few weeks ago, Mochi over at Save, Spend, Splurge had a piece on savings rates around the world. For the most part, the countries with the largest savings rates were also some of the youngest. China, India and Turkey were all in the top 10, and they all have savings rates that make North Americans look bad. Sure, there were some outliers (France and Germany weren’t far behind), but for the most part savings rates kinda followed demographics in general.
The point? I’m assuming you’re young, since you know how to work the internet. You should be saving your ass off. Your parents, on the other hand, are hopefully in pretty good shape. They’re dragging down the average, and it’s perfectly okay. Still, go ahead and put a few extra hundred bucks away this month. We gotta raise that national average to at least beat those filthy Americans.