Japan's traditionally high household saving rate has declined substantially since the early 1990s. While this decline is often explained as a result of the rapid increase in the population share of the elderly who are dissaving, we argue that the cause is a decline in interest income triggered by falling interest rates. To examine our hypothesis, we focus on the effect of the maturation of relatively high-yielding postal savings certificates. Estimating a savings function, we find that the reduction in interest income caused by the maturation of the postal saving certificates reduced household saving rates by 3 percentage points.
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