Effect of Married Women’s Labor Force Participation on Japan’s Household Savings Rate

This study aims to unravel the inexplicable rising trend in household savings rates in Japan by clarifying the effect of married women’s increased labor force participation on it. Using data from the Japanese Household Panel Survey, we employ fixed effects models, robustness tests, and heterogeneity analyses to expose the underlying factors thereof. We, first and foremost, confirm the role of married women’s labor force participation in the rising household savings rates. Second, this effect is subject to heterogeneity, being especially significant for middle-aged and older households (especially those aged 50 years and above), middle-income households, and employed married women. Finally, while married women’s labor force participation substantially increases household income levels, its effect on consumption levels is relatively modest, thereby contributing to an increase in the savings rates. This phenomenon is influenced by changes in the household economic environment during the 2010s, including a stagnation in household income growth, increased burdens from educational and housing costs, and concerns about retirement security.