This paper scrutinizes the role of prolonged, expansionary monetary policy on the savings behavior of Japanese households, focusing on the dramatic change of the household savings behavior since 1998, from high to low savings. Existing literature generally attributes this behavioral change to the country's shift from a high-growth to a low-growth economy and its demographic change. In contrast, this paper empirically examines changes in the incentives for saving and the ability to save connected to monetary policy. It finds that monetary policy has had a significant impact on Japan's household behavior via three channels: the interest rate channel, the redistribution channel, and the wealth channel.
household saving interest-rate elasticity of saving Japanese household savings Bank of Japan low interest rate policy