Recently, The Economist’s Big Mac Index, an index that measures exchange rates through McDonald’s Big Mac hamburgers, surprised many people.
Specifically, the salary of Japanese workers for 1 hour of work in a restaurant or retail store is only enough to buy 2.18 Big Mac hamburgers, much lower than the figure of 3.95 in Australia. The figure in Japan has also decreased by 0.2 hamburgers compared to 5 years ago because wages increase more slowly than inflation.
The weak yen, which hit a 37-year low in 2024, is hurting many workers in Japan.
Number of Big Mac hamburgers that workers in different countries can buy through their hourly wages
Big Mac Index
It is often difficult to compare economic data accurately across borders due to constantly fluctuating exchange rates and differences in working environments. Therefore, economists often compare the price of the same item that is widely used in many countries as an index, such as McDonald’s Big Mac hamburgers, lipstick, or even many other common goods as a standard measure.
Back to the Japan story, Nikkei Asian Review said they used data from Indeed, a US global job website, to calculate hourly wages for employees of 22 global restaurant and retail chains including McDonald’s.
At the same time, Nikkei used local Big Mac prices published by The Economist in the UK to calculate the number of Big Mac hamburgers that workers can buy for an hour of work in their country or region.
According to The Economist, the price of a Big Mac is $3.20 in Japan as of July 2024, nearly 50% lower than in the US and UK, thereby creating the general impression that this type of food in Japan is relatively cheap.
However, according to economist Yusuke Aoki at Indeed Japan, if you look closely, it is becoming increasingly difficult for Japanese workers to buy this type of food as the Yen weakens and wages cannot keep up with inflation.
Specifically, over the past five years, the price of a Big Mac hamburger has increased by 23% in Japan, but hourly wages for workers have only increased by 11%.
Japanese workers’ wages have been virtually flat since the economy saw a property bubble burst in the 1990s, triggering a prolonged period of deflation.
Hourly wages in USD by country
However, the Covid-19 pandemic and a series of geopolitical fluctuations are causing prices of goods and services to rise, leading to inflation rising faster than wages.
To make matters worse, the Bank of Japan (BoJ) has cut interest rates to negative levels to stimulate the economy, and while exporters have benefited, shareholders have instead hoarded assets instead of raising wages, further exacerbating the problem.
“Service industry wages are quite stable now, so pay raises are rare and if they do happen, they are only around 10-20 yen, equivalent to 0.065-0.13 USSD,” said a worker at a McDonald’s restaurant in Tokyo’s bustling Ginza district.
In US dollars, the average Japanese worker will earn only $7 an hour in 2024, down from $8.6 an hour in 2019.
Even hourly wages in Japan have fallen below those of its Asian neighbors such as Singapore and South Korea due to the sharp depreciation of the Yen against the US dollar.
As the yen hit a 37-year low against the dollar in 2024, major brands like Toyota Motor reported record profits and stocks surged to record highs.
But for the Japanese people, the weak yen does nothing more than increase the cost of living.
Highest 33 years
The latest data from the Japanese Ministry of Health and Labor shows that in 2024, the average monthly income of a Japanese salaryman is 348,182 yen, an increase of 2.9% compared to 2023 and the highest increase in the past 33 years.
However, Japanese people are not happy because with an average price increase of 3.2%, the real income of a Japanese worker has decreased by 0.2%.
This is also the third consecutive year that the real income of Japanese people has fallen year after year.
Official figures show Japan’s economy picking up speed by the end of 2024, but adjusted for inflation, it grew just 0.1% last year, down from 1.5% the year before.
Official data showed that household spending in Japan fell slightly in 2024, reversing the upward trend in the previous three years.
In contrast to the US, where strong consumption could revive the economy after the Covid-19 pandemic, persistently weak demand in Japan is causing GDP to stagnate.
Worse, with the tariffs that President Donald Trump has imposed on trading partners including Japan, the Yen is likely to continue to depreciate against the USD, further fueling inflation, putting pressure on the people.
In the context of factories moving abroad, a low Yen cannot fully exploit its advantages.
Japan, on the other hand, is increasingly reliant on imports, including fuels such as coal and gas used to generate electricity. Since Japan shut down most of its nuclear power plants following the Fukushima disaster in 2011, imports account for about 90 percent of its total energy supply. The country also spends more on imported agricultural products than it produces domestically.
A survey in December 2024 found that 60% of Japanese households said their economic situation was worse than a year ago, and only 4% said it had improved. As a result, consumer confidence in Japan is now much lower than before the Covid-19 pandemic.
Source: cafef.vn
Source: Vietnam Insider