How Do the Japanese Cope with Risk?

Charles Yuji Horioka ; Akane Murakami ; Miki Kohara

Professor, Institute of Social and Economic Research, Osaka University, 6-1, Mihogaoka, Ibaraki, Osaka 567-0047, Japan, Tel: +81-6-6879-8586 horioka@iser.osaka-u.ac.jp
Researcher, The Institute for Research on Household Economics, 1-3-13, Hirakawa-cho, Chiyoda-ku, Tokyo 102-0093, Japan, Tel: +81-3-3221-7291 murakami@kakeiken.or.jp
Associate Professor, National Graduate Institute for Policy Studies, 2-2, Wakamatsu-cho, Shinjuku-ku, Tokyo 162-8677, Japan, Tel: +81-3-3341-0493 mikik@grips.ac.jp

JEL Classification: D12, E21

Abstract

In this paper, we examine how Japanese households cope with risk and find (1) that when they encounter unforeseen contingencies, they rely mostly on themselves but that they also rely to some extent on the market, family members, relatives, friends, and the government, (2) that they rely mostly on family members for advice and moral support but not for financial support, (3) that they cope with risk primarily by drawing down their own savings but that they also rely to some extent on insurance, financial transfers, borrowing, and reductions in consumption, and (4) that risk-coping mechanisms and advice- givers vary considerably by event.

Keywords:

Risk, Risk-sharing, Risk-coping mechanisms, Household consumption and saving behavior, Dissaving, Self-insurance

Acknowledgments

The authors are grateful to Masahiro Abe, Chika Fujii, Yoshio Higuchi, Daiji Kawaguchi, Chang-Jin Kim, Jong-Wha Lee, Fumiko Matsumoto, Michiko Mifune, Akiko Nagai, Chong-Hyun Nam, Hak K. Pyo, Changyong Rhee, Keunkwan Ryu, Yasuyuki Sawada, Shizuka Sekita, Dong Shen, Kwanho Shin, Dariusz Stanko, Kenichiro Uesugi, Midori Wakabayashi, Jun-Min Wan, Ken Yamada, and seminar participants at Seoul National University and Korea University for their helpful comments. This paper was presented as a Special Seminar of the Seoul Journal of Economics, Institute of Economic Research, Seoul National University, Seoul, Korea, on October 28, 2002. Any errors and omissions are the sole responsibility of the authors. The research for this paper was supported by Grant-in-Aid for Scientific Research number 12124207 to the first author from the Ministry of Education, Culture, Sports, Science, and Technology of the Japanese Government.

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