A merican consumers have been described as "quick to spend" while Japanese consumers have been "slow to spend." In fact, Americans tend to spend the extra money they get rather than save it. So a tax cut quickly boosts spending, often leading to an overheating of the economy. A culture of overconsumption encourages people to borrow. America, which also relies heavily on borrowing from abroad, is the world's largest debtor nation.

By contrast, Japanese consumers tend to save extra income instead of spending it immediately. So a tax cut does not stimulate consumption as much as it does in America. A big chunk of excess savings finds its way abroad in the form of loans and investment. Japan today is the world's largest creditor nation. Thus far, the world's two largest economies -- one overspending, the other underspending -- have more or less complemented each other, contributing to global growth in the process. Now, however, this pattern is beginning to change. In the not too distant future, Japan will cease to be a "savings power."

The household savings rate in Japan, now close to 5 percent, is a far cry from the peak level of nearly 20 percent. It began dropping in the latter half of the 1990s as the economy continued to stagnate. In terms of the propensity to save, Japanese consumers today are not much different from those in America and Europe. The main reason for this, of course, is the rapid growth of the elderly population. Savings continue to shrink as an increasing number of retirees draw down their deposits. The slow growth of income is also a major reason.