Household savings during the pandemicThe outbreak of the coronavirus (COVID-19) pandemic has led to higher savings rates worldwide. In Japan, decreased household consumption caused by self-quarantine measures and travel restrictions, uncertainty about the future economic development, and a one-time stimulus payment of 100 thousand yen to each household were all factors that have likely impacted household savings in 2020. Net household savings jumped to close to 35.8 trillion Japanese yen in response to the pandemic, while the household saving ratio, which had ranged between one and two percent in the years prior to the pandemic, increased to 11.3 percent. The high savings ratio also led to an increase in financial assets of households in Japan that amounted to 1947.73 trillion yen in the fourth quarter of 2020.
Retirement savings and fear of old-age povertyHouseholds and individuals save to prepare for future consumption. The main motivations to save money among Japanese households included provision for old age and unexpected events such as illness or disaster. In Japan, where the population is rapidly aging, and life expectancy is one of the highest in the world, concerns about retirement savings and old-age poverty are on the rise.
Tax-advantaged long-term asset formation schemes such as the Nippon Individual Savings Accounts (NISA), which was modeled on the UK’s Individual Savings Accounts (ISA), and individual-type defined contribution pension plans (iDeCO), optional private pension plans, have been introduced to encourage asset formation and investments among individuals. Although according to a survey, usage of such asset formation schemes was low, assets in individual-type defined contribution pension plans have quadrupled in the past decade, amounting to more than 2.17 trillion yen in March 2020, while investments in NISA accounts amounted to almost 21 trillion yen as of September 2020.