A Lesson in Saving from Japan

Last year I moved to Japan. It’s been fascinating to observe how the Japanese spend, save, and view money compared to people in the US.

This article seeks to touch on some of the behavioral differences I see in Japanese spending habits, and a few good habits we might consider ourselves.

US household debt currently stands at $12.95 trillion USD.

Japanese household debt, on the other hand, sits currently at $2.86 trillion USD. Adjusted for population, Japan’s household debt is almost half that of the United States’. What gives?

To understand what divides attitudes about spending habits and personal finance between the Japanese and the West, one must first go back to when Japan was mainly an agrarian society.

Back then, Japan followed a caste system. This system was straightforward during times of war, but peacetime brought interesting changes. The merchant class, one of the lowest in the caste system, saw a boom in business during peacetime. Their efforts drove Japan to a stronger economy. They made money, a good deal of it too.

However, while money and power are rewarded with prestige in the US, in Japan successful merchants were left unnoticed. This lack of validation led to the creation of a stigma regarding money and wealth. This stigma is alive in Japan today. It has created an attitude around money unheard of in countries like the United States and the U.K.

Many Japanese people value power and influence over wealth.

Because of the wealth stigma and the Japanese culture’s collectivist emphasis on blending in with the crowd, wealthy people in Japan don’t flaunt their money. It’s often said in Japan that you could be neighbors with a multi-millionaire, but you wouldn’t know because their house looks the same as yours. Simply put, Japanese culture deems flashy spending as unseemly behavior.

There’s no cultural pressure for Japanese people to demonstrate their wealth like there is in the West. In the United States, it’s not uncommon to see people living above their means, so they can put a certain image of themselves out into the world.

This leads many people into financial situations that cause them to live paycheck to paycheck and unable to save up money, which often results in serious debt.

The spending habits of the Japanese are completely opposite the U.S. Wealthy Japanese aren’t inclined to spend much money. Because of that, their wealth is able to grow, and they live off the interest their money and assets incur.

The upper class of Japan tend to live modestly, and their economy is benefitting because of it.

Despite avoiding lavish lifestyles, when wealthy Japanese people splurge on things like vacations and fine art and wine, they shop domestically as opposed to internationally. This keeps money in circulation within the country, and ultimately benefits the economy.

A closer look at Japanese personal finance and spending habits reveals other differences.

For example, one big difference is Japanese children are educated in personal finance when they’re young. Their parents teach them to save money and show them the benefits of avoiding instant gratification from spending.

Japanese parents explain the benefits of saving and teach the consequences of what can happen if you don’t. They also warn their children about borrowing money from others (including banks). Thus, Japanese children start saving money from a young age.

Another notable difference is that Japanese people pay for most purchases in cash, not credit.

•  In 2016, 62% of all consumer purchases in Japan were made with cash.
• By contrast, US cash spending was 34% of total.

There are benefits to paying with cash psychologically. When we pay with a card, we’re not really seeing the weight of what that purchase means for our accounts. With cash, we can see and feel in our fingers the value of what we’re buying.

This often makes us think twice about spending. As such, we end up more reluctant to spend cash. In part, this explains why Japanese people have a better grip on personal finance.

This isn’t to say that Japan is better than the United States, or that Americans aren’t as intelligent as Japanese people. What it comes down to is a variable in our cultures and histories. Neither is particularly wrong or right, and there are merits to doing things in both ways.

However, one thing is abundantly clear in this day and age: with the rising cost of living in the United States and the ever-presence of debt, now might be a good time to take a page out of the Japanese culture book. We could all stand to save a little more money.