Ever since the bubble in the 80s, people in Japan have been saying how they are poor now. Sure, compared with the bubble period, the average income has decreased - but by definition, that's always going to be the case with any bubble.
In checking figures, I am purposely choosing a measure that makes Japan look poorer than it is. That is Annual Household Income Per Capita in USD. Why is this measure pessimistic?
Well, Japan has a lot of single earner households, so looking at the household figure will make this look lower for countries like Japan, and better for countries that have multiple income earners. What's more, many Japanese households have extended family members like grandparents living together with the family which lowers the number further. This is still to some extent fair, since after all, all of the family members need to eat.
Secondly, the yen has been weak against the USD lately, which means that these figured will look lower than the actual drop in purchasing power due to inflation. Again, this figure is not completely unfair since many goods for sale in Japan are purchased from overseas, and some of those are paid for in USD. On the other hand, many goods are produced domestically, so the exchange rate doesn't matter as much for those.
The average Japan household income per capita in 2024 was $15,500 USD. (Compared with $22.7k in 2012 and $14.8k in 2002).
For reference, here is the same number for the following countries:
- China: $4,805
- France: $28,072
- Germany: $33,631
- Malaysia: $5,731
- Mexico: $3,690
- Singapore: $38,976
- South Korea: $19,230
- Switzerland: $60,075
- Taiwan: $16,605
- Thailand: $3,740
- UK: 34,805
- USA: $40,722
Looking at this, Japan is well above most other countries in Asia, but loses to Korea and Singapore, and just barely to Taiwan. European and North American countries are quite a bit higher.
Looking at a more forgiving number, the average salary in Japan, the number is $6,200,000 for 2024, which works out to $39,818 using the exchange rate from 2024-May.
You can think of this as being basically $62k USD when purchasing local goods, and $39k when purchasing foreign goods. Since most people purchase a mix of local and foreign goods the reality is somewhere in the middle.
When you divide by the number of family members per household, the number drops to the $15k USD number listed above. For most families, the most important components of that will be housing and food.
Housing in Japan is not directly affected by exchange rates, and is relatively stable. Even in Tokyo, housing is also very much cheaper than housing in large Western cities. Medical care is also inexpensive compared to countries such as the US.
This means that even with a relatively lower salary, there may actually be more disposable income.
Having said that, there has been mild inflation in the last year, and certain goods have risen more than average. To consumers not used to yearly inflation, this has come as a shock. People tend to notice the things that have gone up more than the average, and not notice the things that have actually dropped in price.
Since it isn't fair to compare these numbers directly when the cost of living is significantly different, there is a concept called Purchasing Power Parity, which allows you to adjust the numbers for the cost of living in each country. When you do that, you'll see things quite a bit differently.
Many companies have started instituting salary raises based on cost of living, but it will be a while before these policies are widely in place and keeping up with inflation.
In the meantime, the situation continues to be that the average Japan is "poorer" than they were during the bubble years, but not poor by any means. The last two years have seen inflation after over a decade without it, which will make a lot of people feel a bit poorer for a few years. This is mainly relevant to the average person with respect to food prices.
Many people in Japan seem convinced that Chinese people are rich. This comes from several observations.
1. China surpassed Japan to become the world's 2nd largest economy by GDP in 2008 (This is based on perhaps suspicious figured provided by the Chinese government, but even if the real date was 2009 or so, it's certainly #2 now).
2. Japanese people see rich tourists visiting Japan all the time and spending a lot of money.
What people don't necessarily realize is that a having a higher GDP is not meaningful when a country has around 10x the population. That simply means the average GDP per capita of China is roughly 10% of Japan's.
Using the latest numbers (October, 2024) of GDP per capita, China has $13,870 while Japan has $35,610. The numbers for South Korea and Taiwan are very similar to Japan, while Singapore clocks in at $93,960!
So yes, the numbers in China have been on the rise, and the numbers in Japan have been felling, but a large part of that is due to the unfavorable exchange rates. These rates will likely improve when the US lowers interest rates. Also, note that the average income in Japan is roughly 3x that of China using most any measure.
The issue with China is that:
1. There is a very large population, so even is you only look at the top 1% earners, there will be a lot of people. Some of those people will want to come to Japan.
2. Income inequality in China is much worse than in Japan or the US.
And only the wealthy Chinese people will be tourists coming to Japan to spend their money. This is of course true in general with tourists to any country. Add to this the fact that the weak yen has made Japan an attractive market for tourist recently, and it shouldn't be surprising to see many visitors from other nearby Asian countries. This is neither good nor bad, just a reality. It does mean, though, that people in Japan shouldn't assume that suddenly all Chinese are wealthy - because that is certainly not the case.
There has also been a fear in some countries, including the US and Japan, that foreigners will buy up all the land. It seems to me that this fear is semi-valid, but the solution is simple. Some countries, such as India and Thailand don't allow foreigners to buy land at all. While that seems a bit overkill, it would be easy enough to implement a system where we only sell land to citizens of countries who also allow Japanese people to buy land there. This would immediately rule out China, since even locals can only "buy" land from the government there for 70 years, which is technically renting.
Back to the point of the article. It's true that with the weak yen and inflation, things are feeling more expensive in the few years so - in fact prices have increased about 10% in the last 5 years. That's in line with the inflation rates of most developed economies, by across the board increases with salary have not yet caught up for everyone.
On the other hand, it's also true that you can get a livable apartment in one of the safest and most vibrant cities in the world (and one that also happens to be the biggest), in a democratic country with a rich culture, and fantastic public transport - for under $500 per month. You can likewise eat for around the same amount - meaning you can live a reasonable life in the biggest city on earth even at minimum wage.
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