Asset Holding and Consumption: Evidence from Japanese Panel Data in the 1990s

The 1990s crash in Japan's stock and land market should have had adverse effects on household consumption. This paper takes advantage of a panel data from Japanese households to evaluate impacts of the wealth gains or losses on households' spending. We find that stockholders' consumption is responsive to stock market movements while this is not necessarily the case for non-stockholders, suggesting the importance of "direct" wealth effects. Moreover, we observe the MPCs out of stock price and real estate price changes are roughly comparable and estimated to be 0.05 to 0.1 slightly higher than previous estimates using aggregate data.