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Tuesday, February 24, 2015

Can Someone Help me Balance the Japanese National Income and Product Accounts ?

I was sincerely shocked to read that the Japanese household savings rate was negative. "The savings rate in the year through March was minus 1.3 percent, the first negative reading in data back to 1955" I had always thought of Japanese as high savers (as they used to be). But the reason I was shocked is I can't get the national income and products accounts to balance. By my calculations, total effective demand is about 7% higher than total supply (this is impossible). I get household savings of about -1% of GDP (correspondind to the -1.3% of personal disposable income plus pension distributions) government savings famously -7% of GDP and Japan must have positive net exports mustn't it ? Well actually no. Another shocking fact is that Japan has suddenly shifted from the usual trade surplus to a trade deficit. Why has nobody told me ? However, the deficit is only about 1.5% of GDP. The only remaining category I can think of is corporate saving, which I get at around 6.5% of GDP. How can that be ? I can't find Japanese corporate profits at FRED (the first time it has failed me so no link for you today FRED). In the USA corporate profits net of taxes and depreciation are roughly 7% of GDP. The ratio must be much higher in Japan. Corporate savings would be net profits minus the sum of net investment and dividends paid by corporations. It's almost as if Japanese corporates were investing only to replace depreciated capital and not paying dividends. Or very profitable. Can someone explain to me what is going on ?


Anonymous said...

Bob McManus here, no economist or expert omn Japan but recommending R Taggert Murphy's Japan and the Shackles of the Past, 2014
for a start, this from around page 200

"The baby boomer bulge has now passed that peak and is drawing down savings. Aggregate household savings are falling as a result. In the meantime, most corporations have completed the de-leveraging process and have long since repaired their balance sheets...

As corporations once again see opportunities domestically, they will dip into the savings they built up as they recovered from the balance sheet recession...

The current account does,
as noted, include dividend and interest flows as well as trade in goods and services; Japan has over the past decades built up such a pile of claims on other countries that the dividend and interest inflows the country enjoys ..."

Bob again.

FDI, offshoring, outsourcing, precarious labor, whole neoliberal menu, rentier economy with rents from technology advantage. Since Japan was unsafe to invest in during and after the bubble, money was invested in East Asia. I picture a lot of the "Japanese" economy as raw materials shipped to Thailand, made into a component at a factory owned by Japan with closely held proprietary technology, to be assembled in China and sold in America. The profits may remain in Thailand to build another factory.

Ramanan said...

You can find the data here:

Anonymous said...

Does Japans' increasing NIIP play a role ?

Anonymous said...

A more up-to-date NIIP table , from IMF :