is that the per capita GDP 5 in Japan is lower than that of South Korea and less than half of that in the United States. The wage gap with the United States and South Korea is also widening. These are not just changes in numbers. This shows that the Japanese have actually become poorer and the Japanese industry has become weaker. The purchasing power of
yen has returned to the level of the 1960s
yen depreciation continues at an incredible speed. Earlier this year, the yen exchange rate against the U.S. dollar was around 115 yen and 139 yen to 1 dollar on July 14 (see Figure 1). There are many depreciation of other currencies, but the depreciation of the yen is particularly prominent.
Therefore, the value of various data converted in US dollars has changed dramatically, and Japan's position in the world has dropped significantly.
represents the purchasing power of the yen " actual effective exchange rate " as shown in Figure 1. May 2022 is 61.77. This is basically the same as in 1971. It has now dropped to 50.
This index is based on 100 in 2010, and compared with that time, the purchasing power of the yen has been reduced by nearly half. If it reaches 1 dollar to 140 yen, the living standards of Japanese people may drop to the level in the 1960s.
The ranking of per capita GDP reflecting the degree of wealth has also changed greatly with the change of exchange rate . The per capita GDP denominated in the domestic currency (according to IMF data) is converted at the latest exchange rate, as follows.
If calculated based on the exchange rate of 1 US dollar to 1,316.35 won in mid-July, South Korea's per capita GDP is US$31,902. On the other hand, if the yen exchange rate against the US dollar is 139 yen, Japan's per capita GDP will be 32,010 US dollars higher than South Korea. However, if the exchange rate reaches 140 yen to 1 USD, Japan's per capita GDP is 31,782 USD, which is lower than South Korea.
The same thing happened between Japan and Taiwan. As wages rise rates in South Korea and Taiwan are high, people have predicted that their per capita GDP will surpass Japan sooner or later, but this expectation is realized ahead of schedule due to the depreciation of the yen.
In addition, the per capita GDP of the United States is US$76,027 (IMF data). Japan is only about 40% of that of the United States. In 2020, Japan's per capita GDP was more than 60% of that of the United States. In just two years, Japan's income is less than half that of the United States.
Figure 1
In the decade of Abenomics , Japan became poor
Judging from the figures in 2012 before Abenomics began, Japan's per capita GDP is comparable to that of the United States, about twice that of South Korea (see Figure 2). It can be seen that there have been great changes in the past 10 years.
However, Japan's per capita GDP in 2021 is still about 15.7% higher than South Korea. Later, due to the sharp depreciation of the yen, South Korea surpassed Japan (the exchange rate in 2022 in Figure 2 was measured by the IMF, and the exchange rates of South Korea and Taiwan were lower than those of Japan).
Figure 2
Wage gap between Japan and South Korea widens
Regarding wages, OECD released international comparative data. Based on this, Japan, which is denominated in its own currency, is 4.44 million yen, South Korea is 42.54 million won, and the United States is 74,737 US dollars. If converted at the previous exchange rate, Japan is $31,714 (1 USD = 140 yen case) and South Korea is $32,316.
In terms of salary, South Korea has surpassed Japan since a few years ago, but the gap is getting bigger and bigger now. In addition, prices in Japan are less than half that in the United States.
Judging from the total market price of enterprises, Japan is also behind. The number one Toyota Motor Company ranks 39th in the world, worth $211 billion.
In contrast, Taiwan's semiconductor manufacturer TSMC (TSMC), ranked 11th in the world, with exports of US$433.9 billion, and South Korea's Samsung Electronics ranked 25th in the world, with exports of US$299.1 billion.
Even if the salary does not increase in Japan, iPhone will increase its price
Maybe some people will think that the above is just a number and has nothing to do with actual economic activities and life. Some people may think that no matter how the purchasing power of the yen decreases, it doesn’t matter as long as you live in Japan. But that's not the case.
Due to the depreciation of the yen, domestic prices in Japan are rising. On the other hand, due to the fact that wages do not rise, the lives of Japanese people are getting harder day by day.
The price of products that cannot be produced in Japan is indeed rising because the depreciation of the yen is indeed rising. The price increase of iPhone on July 1 is the most obvious example. The highest-end iPhone 13 Pro Max rose from the previous 134,800 yen to 159,800 yen. The price increased by 25,000 yen.
Because the price in the United States has not changed, this is an adjustment to the depreciation of the yen. If the price in Japan does not change, those denominated in US dollars will become cheaper. Moreover, since international goods and prices are no longer valid, international resale may occur. To prevent this from happening. In fact, the markup rate (18.5%) is basically the same as the depreciation rate of the yen that began at the beginning of this year.
iPhone can achieve international one-price
At this point, iPhone and Big Mac form a sharp contrast. In the case of a giant, because there is no international resale, the international price is not valid. In countries with low wages, the price of a giant is often cheaper.
Big Mac Index is the ratio of the real exchange rate to the international unit price exchange rate. In contrast, products like iPhone that can be sold across countries will rise even if the wages in Japan are very low.
In terms of wages and per capita GDP, "cheap Japan" continues. However, things have changed a lot in terms of goods and services that can be moved internationally. Moreover, it is becoming a "Japanese with low wages and high prices".
is not just the iPhone that cannot be produced in Japan. It is also impossible to manufacture the most cutting-edge semiconductors. Therefore, these products must be purchased at a higher price. If the yen continues to depreciate, these things will be too expensive and Japan may not be able to afford them.
The same situation applies to international mobile labor (such as senior professionals). If Japan's salary is very low, the international price will not be established, so talents will flow from Japan to overseas.
Conclusion- Japan cannot reverse this situation in the short term
So, is this situation no longer reversible?
This mainly depends on Japan's economic policies in the future. If you do nothing, the depreciation of the yen will further intensify, and the situation seen above will worsen. However, if the financial easing policy is changed and interest rates are allowed to rise, the depreciation of the yen will stop and the appreciation of the yen is also possible. In this way, the above situation will change greatly.
Based on the current series of problems facing Japan, such as population aging, low wages, labor shortage, and inflationary pressure, I think Japan cannot reverse this situation in the short term.
