The other source of the decline of real GNP growth performance lies in the gradual fall in the saving rate. As presented in Table 4, the gross national saving rate is projected to decrease substantially over time, declining to 7.9 percent by 2025. The expected rise in social security contributions as well as in household consumption resulting from population aging is primarily responsible for the fall in the saving rate; increased social security contributions lead to a rise in the wage bill, which will, in turn, reduce corporate savings; and the growth of retirees relative to workers depresses household savings, as is theoretically consistent with the framework of life cycle savings (Mason, 1988). It should also be noted that Horioka (1988) examined 30 different factors on the basis of data gathered from various OECD countries and Japan, and identified the following three significant factors accounting for Japan's high household saving rate： (i) the low proportion of the aged population, (ii) the bonus system, and (iii) the rapid rate of economic growth. The NUPRI model shows that both the first and third factors are likely to adversely affect Japan's household savings as her population aging process advances.
It is worth noting, however, that the above result for the saving rate may differ considerably, if the following three considerations are incorporated in the model. First, Ando (1985) has suggested the possibility that further improvements of life expectancy may motivate Japanese workers to save more. Second, the extent to which the government's recent policy shift from export-oriented growth to domestic consumption-fueled growth is implemented may lead to a lower saving rate. Third, although the low interest rate policy has been implemented by the monetary authorities in postwar Japan, it is likely to rise in the future as Japan's financial liquidity diminishes in the process of population aging. Then, the higher interest rates in the domestic financial market will not only prevent a flight of capital abroad but also induce a return or inflow of capital from outside. Despite the declining savings rate, therefore, this shift of capital may lead to an increased capital-labor ratio, thus facilitating favorable growth performance. These three considerations, however, are not incorporated in the NUPRI model.
