Answer to Question #152892 in Macroeconomics for Hasib

Question

Household saving rates in Japan are very high. Is this fact good for the Japanese economy? Why or why not?

Answer 1

Higher household saving in Japan can help finance higher levels of investment and boost productivity. If people save more, it enables the banks to lend more to firms for investment. An economy where savings are very low means that the economy is choosing short-term consumption over long-term investment.