Believe it or not, “expensive” Japan is actually undervalued

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In the annual lists of the world’s most expensive cities, Tokyo was usually placed at or near the top.

Take the Mercer Cost of Living Survey, which recently surveyed 209 cities on five continents. When measuring the comparative cost of more than 200 items such as shelter, transportation, food, etc., Ashgabat, Turkmenistan, turned out to be the most expensive. It was followed by Hong Kong (which took first place in 2019 and 2020) and Beirut. Tokyo took fourth place, with the top 10 rounded off by Zurich, Shanghai, Singapore, Geneva, Beijing and Bern in Switzerland.

Given Tokyo’s longstanding reputation as an expensive place to live, the August 28th cover story in Weekly Diamond deserves praise for grabbing reader attention with the defiant headline, “Japan Is Too Cheap.”

Diamond cited some solid arguments in support of his claims: For example, Japanese workers in the Group of Seven – Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States – receive the second lowest average minimum wage after the United States, around 30 % lower than the country with the highest, France.

In a graph showing the average purchasing power of citizens in the 35 member countries of the OCED (Organization for Economic Cooperation and Development), Japan is in 22nd place, three places behind South Korea in 19th place.

According to OCED data, average wages in Japan have also been rising since the beginning of the 21st.

South Korea’s average wage dwarfed Japan in 2015, and the gap has widened further, with a difference from last year of the equivalent of $ 3,445 – about 379,000 yen, or 31,600 yen on a monthly basis.

The remuneration for leadership positions in Japan is particularly low: When Diamond magazine and Mother’s Japan carried out a 15-nation comparison of wage levels for grassroots workers, department heads, department heads and executives in mid-2020, it found that executives rated Japan 30% lower than China, 20% lower than South Korea and several percentage points lower than the Philippines, Indonesia and Thailand.

Tokyo’s reputation as an expensive city was exposed in a July survey conducted by Diamond’s price comparisons for various consumer goods in six cities of London, New York, Seoul, Shanghai, Singapore and Tokyo. Tokyo took fourth place with 127 yen for a 1.5 liter bottle of water; at ¥ 259 for a dozen medium-sized eggs, fifth; for 380 yen for a large cafe latte at Starbucks, sixth; at ¥ 995 for a Big Mac hamburger, fifth; at 8,201 yen for mid-range Nike running shoes, sixth; and for 995 for a dinner in a medium-priced restaurant in fourth place. Tokyo’s best-placed item was second place for a starting price for taxis at 420 yen.

Ryutaro Kono, chief economist at BNP Paribas Securities, told Diamond that he believed Japan’s low ranking was mainly due to polarization in the labor market.

“Extraordinarily employed (part-time workers and employees of manual mail-order companies) made up 36.7% of all employees in the first quarter of 2021,” he says. “These workers have few options for on-the-job training or off-site training, so their productivity does not increase. And less is spent on their ‘off-the-job training’.

“In other countries salaries are tied to a job description and pay the same salaries for the same type of work. Japan did not adopt this system, so wages are not determined by the content of a ‘job’ but by the person who is hired. “

The surveys carried out regularly are a reliable measure of the employees’ disposable income kozukai, the pocket money paid monthly by their wives to male wage earners. That year, a PR Times poll found husbands in families with children were getting 30,338 yen a month – an increase of just 816 yen from a Shinsei Bank poll eight years ago.

The PR Times poll was also revealing what husbands did to top up their monthly pocket money. For example, 41.4% of those surveyed stated that they had a part-time job in black. Among the other answers: 25.2% asked their spouse for more money; 6.2% made revolving payments by credit card; 5.0% borrowed from their parents; 1.8% borrowed against future wages; and finally 0.4% took short-term loans from a sarakin (Consumer financier).

Spa (August 31st to September 7th) saved the worst news for the last time. Authorized by a 2019 revision of the tax code aimed at “other income”, the tax office is preparing to levy income taxes over 200,000 yen per year. Taxes are levied not only on income from part-time jobs, but also on the sale of collectibles through flea markets, investing in common stocks, trading cryptocurrencies, and redeeming life insurance prematurely.

According to business journalist Shinichiro Suda, the introduction of the mandatory tax identification system “My Number” and the standardization of electronic tax returns have closed most of the loopholes in avoiding taxes on disposable income.

Suda believes that the average worker can expect a “big tax hike” after the coronavirus pandemic ends.

“It is not a mistake that in a few years time the Treasury Department will push through a tax increase with the possibility of increasing the consumption tax by 5% (from 10% now to 15%) for a limited period of time,” he predicts.

With stricter taxes on other income and the expectation of a higher excise tax rate, Spa provides for a “double blow” that will hit the wallets of the already hard-pressed illegal workers even harder.

Big in Japan is a weekly column that focuses on topics discussed by domestic media organizations.

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