Inside Japan’s Disposable Housing Market

But I guess in Japan most of the portion of savings goes into international investments, which is good.

Yes it does. Modern economic systems are built on consumerism. Saving large sums of money acts like a vacuum on currency and brings markets to a halt. Flowing money lubricates the economy.

That's basically the sum total of the most recent economic crisis, money wasn't moving, so two presidential administrations through gigantic sums of money at the economy, like spraying it down with WD-40, until it started moving again.

> Either the person spends that money on something else or sticks it in their savings account and the bank loans some of it out for someone else to spend.

The problem is that in aggregate, if nobody is spending money, it doesn't move around at all. If nobody takes out a loan, then that money just sits in the bank. Sitting money means nobody needs to manufacture anything because nobody is buying anything, which means there's no reason to employ anybody, so nobody makes money. Because times are bad, they save what they have even more and spending continues to go down.

Fairly quickly the economy goes into a death spiral, and while plenty of people may have money, there's nothing to spend it on anyway.

China is using the same economic trick that's been used time and time again, in the U.S., Japan, other places, to kickstart their economy. It's dumping money into the economy in huge works projects, mostly construction related, and letting that money slosh around. Japan did it in the 80s, but it's no longer working as well as it once did, because pretty much everything they need to build is built, and the population is shrinking so they need even less things.

  Have you ever witnessed the anger of the good shopkeeper,
  James Goodfellow, when his careless son has happened to 
  break a pane of glass? If you have been present at such a 
  scene, you will most assuredly bear witness to the fact 
  that every one of the spectators, were there even thirty 
  of them, by common consent apparently, offered the 
  unfortunate owner this invariable consolation – "It is an 
  ill wind that blows nobody good. Everybody must live, and 
  what would become of the glaziers if panes of glass were 
  never broken?"
  

  Now, this form of condolence contains an entire theory, 
  which it will be well to show up in this simple case, 
  seeing that it is precisely the same as that which, 
  unhappily, regulates the greater part of our economical
  institutions.
  

  Suppose it cost six francs to repair the damage, and you 
  say that the accident brings six francs to the glazier's 
  trade – that it encourages that trade to the amount of 
  six francs – I grant it; I have not a word to say against 
  it; you reason justly. The glazier comes, performs his 
  task, receives his six francs, rubs his hands, and, in 
  his heart, blesses the careless child. All this is that 
  which is seen.
  
  
  But if, on the other hand, you come to the conclusion, as 
  is too often the case, that it is a good thing to break 
  windows, that it causes money to circulate, and that the 
  encouragement of industry in general will be the result 
  of it, you will oblige me to call out, "Stop there! Your 
  theory is confined to that which is seen; it takes no 
  account of that which is not seen."
  
  
   It is not seen that as our shopkeeper has spent six 
  francs upon one thing, he cannot spend them upon another. 
  It is not seen that if he had not had a window to 
  replace, he would, perhaps, have replaced his old shoes, 
  or added another book to his library. In short, he would 
  have employed his six francs in some way, which this 
  accident has prevented.
  
  Frédéric Bastiat, 
  in his 1850 essay "Ce qu'on voit et ce qu'on ne voit pas" 
  (That Which Is Seen and That Which Is Not Seen)