Household Debt and Aging in Japan

Abstract

In this paper, we analyze the borrowing behavior of Japanese households in comparison to the other Group of Seven (G7) countries and also broken down by the age group of the household head. We find that preretirement households (households with a head in the 50-59 age group) in Japan do not have inordinate amounts of debt and that their financial health is satisfactory. However, we also find that households with a head in the 30-39 age group have shown a sharp increase in debt holdings in recent years, due partly to the fact that tax breaks for housing purchase, reforms in the housing loan market since the early 2000s, and expansionary monetary policy enabled Japanese households to purchase housing at a younger age than they could previously. We therefore need to monitor the borrowing behavior of this cohort over time as the Bank of Japan normalizes its monetary policy, especially since households have become more vulnerable to rising interest rates as the share of households who have chosen variable-rate housing loans has increased in recent years.

Is the selfish life-cycle model more applicable in Japan and, if so, why? A literature survey

“…8 This conclusion is surprising at first glance because it is well known that, during the high-growth era from the mid-1950s until the early 1970s, the Japanese government funneled capital from households to firms to enable them to finance massive amounts of investment in plant and equipment and that consumer credit was largely unavailable. It must be borne in mind, however, that after economic growth slowed, loans to households for housing and automobile purchases and other purposes expanded rapidly (see, for example, Horioka and Niimi ( 2020 , 2021 )).…”