Japan and the Western Model: An Economist’s View of Cultures of Household Finance

Abstract

It is commonly believed that the Japanese and other Asians are penny-pinchers and savers and that Americans and other Westerners are spendthrifts and borrowers, but do the data bear out this conventional wisdom? The purpose of this chapter is to shed light on this question using data on household wealth (assets) and indebtedness (liabilities) from the Organisation for Economic Co-operation and Development (OECD) on the Group of Seven (G7) countries, the world’s seven major industrialized countries. I then explore why the conventional wisdom is—or is not—correct.

I presented an earlier version of this chapter at the workshop “Cultures of Credit: Consumer Lending and Borrowing in Modern Economies,” which was held at the German Historical Institute (GHI), Washington, D.C., on February 5–6, 2010. I am very grateful to Lawrence Bowdish, Sheldon Garon, Andrew Gordon, Jan Logemann, and the other workshop participants, as well to Shizuka Sekita and the other participants of my graduate seminar at Osaka University for their helpful discussions. I would also like to thank Andrew Gordon for his valuable information about data issues.