BIS paper links Japan’s household debt to consumption behaviour

A street in Japan

A new paper from the Bank for International Settlements compares Japanese households’ debt with their marginal propensity to consume, finding that the two are clearly linked.

In The role of household debt heterogeneity on consumption: Evidence from Japanese household data, Jouchi Nakajima works to estimate the impact that household debt has on consumption behaviour. He shows that households with less debt have far lower marginal propensities to consume, meaning that they save proportionally

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