Photo/Illutration A woman shops for vegetables at a supermarket in Tokyo’s Nerima Ward in May. (Tetsuro Takehana)

Hopes that households will pour tens of trillions of yen into the economy when the pandemic ends were likely behind the central bank chief’s remark that Japanese have become “more tolerant” of rising prices.

Although Bank of Japan Governor Haruhiko Kuroda retracted the comment, such BOJ hopes for the spending of “forced savings” remain solid.

Forced savings consist of income that households could not spend because of restrictions on activities and movements imposed after the novel coronavirus pandemic hit in early 2020, according to the BOJ.

Such savings have risen 2.5-fold since the end of 2020 to 50 trillion yen ($376 billion yen) as of the end of 2021, according to the central bank’s estimates.

The BOJ believes that forced savings could offset declines in households’ real income caused by rising commodity prices.

The central bank said in its April 2021 report on the outlook for economic activity and prices that Japan’s dismal consumer spending could rebound as soon as the pandemic is under control and households start tapping into their forced savings.

In a speech on June 6 that got him into trouble, Kuroda effectively said consumers in general are becoming more tolerant of higher prices, citing surveys on households.

But he also suggested in the speech that tolerance is growing partly because forced savings are piling up.

Kuroda also referred to forced savings of Japanese households when he gave a lecture at Columbia University in New York in April.

He said the current surge in commodity prices and the increases around 2008, when energy prices jumped and Lehman Brothers collapsed, are different because of the existence of pandemic-related forced savings.

“Forced savings that accumulated under prolonged social restrictions are expected to mitigate the negative impact of the decline in households’ real income caused by the rise in energy prices,” Kuroda said in the lecture.

A senior official with the central bank expressed hopes that forced savings will turn around the economy.

“If they are spent, that would reinvigorate the economy and likely lead to wage increases,” the official said.

According to the BOJ, nearly half of all forced savings were held by households with annual incomes of 8 million yen or more.

But the median household income in Japan is less than 4.5 million yen, according to labor ministry data. And households with annual incomes under 4 million yen represent about 10 percent of Japan’s forced savings.

That means that about 90 percent of Japan’s forced savings were held by households above the median line.

The BOJ specified that point in its published report, but Kuroda did not refer to it when he gave the speech on June 6.

Low-income families are being hit hardest by the risng consumer prices because food and other daily necessities make up a larger portion of their spending.

Shinichi Ichikawa, a senior fellow at Pictet Asset Management (Japan) Ltd., doubts that a wave of forced savings will be released after the pandemic ends.

He said that consumers similarly saved 4 trillion yen after the 2011 Great East Japan Earthquake and tsunami disaster. But there is no data showing that these savings were later spent.

“A majority of families are less likely to touch their savings because of uncertainties in the future,” he said. “The prospects for economic growth and wage hikes are not bright.

“And the accumulation of forced savings does not necessarily mean that consumers are becoming more accepting of rising consumer prices.”

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The Asahi Shimbun

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