Oh to be average! Household savings in Japan hit highest average in years

Average household savings in Japan increased to 18.8 million yen (around 146,000USD) in 2021, reaching the highest amount in two decades, according to a survey report by the Ministry of Internal Affairs and Communications. 

The ministry’s Household Survey Report 2021 (Savings / Debts) published on May 10 this year, revealed that 2021 marked an increase in savings for the third consecutive year among households of two or more persons. 18.8 million yen is the largest amount of savings since 2002, since comparative data became available. 

The increase in savings came despite a decrease in annual income among households in Japan to 6.33 million yen, a decrease of 10,000 yen, or 0.2 percent, from the previous year. 

Broken down into age groups (based on the age of the head of each household), survey results showed that those households under 40 years of age had the lowest average savings in 2021 at 7.26 million yen. Households in their 60s accounted for the highest savings at 25.37 million yen while those in their 40s and 50s had savings of 11.34 million yen and 18.46 million yen respectively. 

Never have we wanted to be so average!  

Perhaps an average household savings in Japan of 18.8 million yen seems like a lot. In the interests of honesty, it brought out this expat half of a two-person household into a cold sweat.  

So, if, like us, the figures thus far have left you with a nervous urge to dig out the calculator in order to figure out how much you need to save during your remaining working years just to join the rest of the pack, there are perhaps other factors that may help to paint a clearer picture.

It was always likely, for a start, that a more wealthy minority would tip the balance of average savings in their favor, so to speak. According to the report, 67.6 percent of households surveyed actually had savings below the average of 18.8 million yen. Just over 10 percent of households had savings of less than one million yen. 

A median value - the number right in the middle - for household savings in Japan might make for easier reading which in 2021 was just over 11 million yen. 

"In 2021, (working) households had average savings of 14.54 million yen with a median value of 8.33 million yen."

54.9 percent of the households surveyed were what the ministry report referred to as “working households.” In 2021, these households had average savings of 14.54 million yen with a median value of 8.33 million yen. Annual income among these working households in 2021 was 7.49 million yen, up 90,000 yen, or 1.2 percent, from the previous year. 

Maybe net savings, taking into account debts and other liabilities, will paint a different or even more useful picture for some.  

Average household debt in Japan (for households of two persons or more) was 5.6 million yen, according to the report. 

The following table shows a breakdown of household savings and liabilities by age group: 

*Data from Household Survey Report 2021, Ministry of Internal Affairs and Communications

We can see that households with heads who are yet to have reached their 50s had liabilities in excess of their savings in 2021, largely due to them being homeowners with mortgages to pay off. 

Households surveyed for savings and debt as part of the Household Survey Report were selected from 168 municipalities across Japan, from which 8,076 households with two or more persons were selected by random sampling method.

For us, the ministry’s report has once again brought up the specter of our long-term future in Japan and what our retirement might look like, including financially, be it in this country, back home, or elsewhere.

Perhaps for the longest time, too long maybe, as an expat in Japan, a life of taking it year-by-year, contract-by-contract, has made it hard for us to be prudent in our financial planning. Presented, arguably, with higher hurdles to gaining permanent employment, getting access to home loans, and securing our long-term future in Japan in general, maybe the average expat in Japan has legitimate reason to take a more laissez-faire approach to financial planning, should they wish. On the other hand, maybe these factors provide greater motivation to be prudent.

Financial literacy in Japan

In the absence of being able to offer financial advice, something which we would venture to say doesn’t exactly make itself clear and present as a foreigner living in Japan, perhaps another survey can at least offer some clarity as to the financial consciousness among the public in Japan. 

The Central Council for Financial Services Information, which operates under the secretariat of the Public Relations Department for the Bank of Japan, is involved in promoting the advancement of financial knowledge. In 2019 the council conducted its most recent Financial Literacy Survey, gathering samples from 25,000 respondents across Japan. 

As well as a series of true-or-false questions which were used to gauge the financial literacy of respondents, the survey also addressed respondents with questions regarding their financial future. 

Identifying three major life expenses - living expenses for retirement, children’s educational expenses, and the cost of buying a house - survey results revealed that fewer than half of respondents had any kind of financial plan in place to address these expenses. In terms of actually putting, or having put, funds aside to cover such expenses in the future, 25.8 percent of respondents had done so for their retirement, 32 percent for their children’s education, and 15.3 percent for purchasing a house, as shown in the table below.

* Data from the Financial Literacy Survey 2019, Central Council for Financial Services Information

On the point of putting aside funds for retirement.  

We spent our early years in Japan not paying into a public pension scheme (kokumin nenkin) largely due to employment at unscrupulous English school operations and our own ignorance surrounding such matters. It took finding an employer which had its employees on social insurance (shakai hoken) to set us on the right path in that regard. It’s perhaps a pattern familiar to many foreigners who come to live in Japan and stay longer than they had originally planned.

At the time of writing, we’re a few kokumin nenkin payments away from qualifying for a public pension. Off the top of our head, we don’t know how much we currently stand to qualify for but we could dig out the postcard that tells us. 

"Nearly 62.9 percent of respondents didn’t know the amount of (pension) benefits they are qualified to receive."

57 percent of the 2019 Financial Literacy Survey respondents didn’t know how many years of paying contributions is required in order to qualify for pension benefits in Japan. Nearly 62.9 percent of respondents didn’t know the amount of benefits they are qualified to receive. 23.7 percent of respondents didn’t know anything of the public pensions scheme that was put to them in the survey.  

In the, potentially, more immediate future, survey respondents were asked if they had set aside rainy day funds that would cover their expenses for three months in the case of loss of employment or other emergencies. 54.4 percent of respondents said that they had. 

The Financial Literacy Survey 2019 was conducted online targeting 25,000 individuals aged 18 to 79 who have been chosen in proportion to Japan's "demographic structure," according to the council.

Whether or not such data reflects financial ignorance or savvy among respondents, or is more reflective of their more material financial circumstances, is not known to us. 

Comparing the results of the survey’s true-or-false questions to the results of a similar survey conducted overseas revealed that Japan ranked low in financial literacy - 22nd out of 30 countries.  

Efforts have been made to improve financial literacy in recent years in Japan, particularly among young people. Revisions to the national school curriculum are said to have been aimed at giving more substance to financial education in high schools in particular. This has perhaps acquired even more importance after the legal age of adulthood in Japan was lowered from 20 to 18 from April 2022.    

Experts have also cited Japan’s aging population and the increase in payment options behind a need to strengthen financial education across the population.

“The aging of the population, the increased use of cashless payment, and the money and asset management associated with them have become increasingly popular topics in the media. These topics have raised alarming cases highlighting the necessity for financial literacy education,” Masayoshi Amamiya, Deputy Governor of the Bank of Japan, said during a speech at a seminar hosted by the Tokyo Stock Exchange in February 2020.  

“When people's financial literacy improves, they tend to exhibit desirable financial behavior, such as setting long-term financial goals, and they become less likely to find themselves involved in financial trouble,” he said.  

Contemplating the extent to which long-term foreign nationals in Japan can expect to be part of any financial literacy drive leaves us feeling skeptical. In our experience at least, we tend not to inspire confidence among this nation’s financial institutions.

All the more reason for prudence and planning perhaps. 

Related:

Okozukai “pocket money” down among workers in Japan in 2022, survey

COST OF LIVING IN JAPAN in 2022, inflation & the weak yen

Did any of these statistics mentioned in this article regarding household savings in Japan surprise you?

What kind of resources have you found to help you plan financially for a future in Japan? Feel free to share them in the comments below.