The BBC doesn't seem to understand basic economic theory. That's a shame.
As further evidence I point to this overwrought article penned (electroned?) by Linda Yueh, identified as the BBC's Chief Business Correspondent. She describes Japan's most recent data on aggregate household savings as constituting "another blow" to Prime Minister Abe. Japan's net aggregate household savings turned very slightly negative according to the data.
Ms. Yueh has gotten the story exactly backwards. First it's important to understand that saving is simply deferred consumption. Saving is neither virtuous nor sinful in and of itself. A young adult could easily be quite foolish to try to save instead of borrowing to invest in a university education, for example.
The Japanese Prime Minister's entire economic program is premised on trying to get businesses and consumers to spend more on present consumption. Consequently he'd be rightly pleased that Japanese households have shifted more of their future potential consumption to the present, because that consumption is needed now to pull the Japanese economy out of its doldrums, not 20 years from now. Yueh correctly reports the disappointment in household consumption data (also down), but the shift away from savings is fantastic news, not "another blow."
Moreover, why should old people save so much? That is, Japan has an aging population (as Yueh also points out), and older people really should spend more, now, on themselves, their children and grandchildren, on charities -- anything they like. That's quite reasonable and proper.
There might be some concern that declining net overall household savings could mean a shortage of capital, but that's not at all Japan's problem. Japan has been stuck at the zero lower bound for a couple decades. Investment capital is plentiful and cheap. Yueh's own reporting bears that out since she notes that Japanese corporate balance sheets are strong, i.e. they're sitting on lots of cash.
Anyway, Prime Minister Abe ought to be delighted that Japanese households are finally reducing their hoarding of cash. That particular part of the Japanese economic story is great news. It's too bad the BBC's Chief Business Correspondent didn't grasp that reality.
As further evidence I point to this overwrought article penned (electroned?) by Linda Yueh, identified as the BBC's Chief Business Correspondent. She describes Japan's most recent data on aggregate household savings as constituting "another blow" to Prime Minister Abe. Japan's net aggregate household savings turned very slightly negative according to the data.
Ms. Yueh has gotten the story exactly backwards. First it's important to understand that saving is simply deferred consumption. Saving is neither virtuous nor sinful in and of itself. A young adult could easily be quite foolish to try to save instead of borrowing to invest in a university education, for example.
The Japanese Prime Minister's entire economic program is premised on trying to get businesses and consumers to spend more on present consumption. Consequently he'd be rightly pleased that Japanese households have shifted more of their future potential consumption to the present, because that consumption is needed now to pull the Japanese economy out of its doldrums, not 20 years from now. Yueh correctly reports the disappointment in household consumption data (also down), but the shift away from savings is fantastic news, not "another blow."
Moreover, why should old people save so much? That is, Japan has an aging population (as Yueh also points out), and older people really should spend more, now, on themselves, their children and grandchildren, on charities -- anything they like. That's quite reasonable and proper.
There might be some concern that declining net overall household savings could mean a shortage of capital, but that's not at all Japan's problem. Japan has been stuck at the zero lower bound for a couple decades. Investment capital is plentiful and cheap. Yueh's own reporting bears that out since she notes that Japanese corporate balance sheets are strong, i.e. they're sitting on lots of cash.
Anyway, Prime Minister Abe ought to be delighted that Japanese households are finally reducing their hoarding of cash. That particular part of the Japanese economic story is great news. It's too bad the BBC's Chief Business Correspondent didn't grasp that reality.
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