THE strongSTAGNATIONstrong OF HOUSEHOLD CONSUMPTION IN JAPAN - University.pdfVIP

THE STAGNATION OF HOUSEHOLD CONSUMPTION IN JAPAN Charles Yuji Horioka Institute of Social and Economic Research, Osaka University, Osaka, Japan, and National Bureau of Economic Research, Inc., Cambridge, Massachusetts, U.S.A. December 31, 2003 Revised May 25, 2004, and June 8, 2004 Institute of Social and Economic Research, Osaka University 6-1, Mihogaoka, Ibaraki, Osaka 567-0047, JAPAN Telephone: 81-(0)6-6879-8586, 8574, Facsimile: 81-(0)6-6878-2766 Email: horioka@iser.osaka-u.ac.jp Prepared for the Venice Summer Institute (VSI) Workshop on “Economic Stagnation in Japan,” which was held July 25-26, 2003, in Venice, Italy, under the sponsorship of the CESifo, a joint initiative of the University of Munichs Center for Economic Studies and the Ifo Institute for Economic Research, Munich, Germany. The conference volume is being edited by Michael Hutchison and Frank Westermann and is forthcoming from MIT Press. Abstract In this paper, I consider the extent to which the stagnation of household consumption is responsible for the decade-long recession in Japan during the 1990s and early 2000s and the reasons for the stagnation of household consumption during this period and find that the stagnation of private investment (and inventory investment) rather than that of household consumption was the major cause of the decade-long recession, that household consumption was nonetheless relatively stagnant during this decade, and that the stagnation of household consumption was due primarily to the stagnation of househ