The Price Of A Thousand Yen

About 20 years ago, I have had heard that the average price for a typical lunch meal in Japan was between 800 and 1,000 yen, which in 2004 terms, was around SGD 12 to SGD 16¹. That cost, in local terms, was reserved for restaurants, not hawker centres and coffee shops where the price then (by my reckoning) was around SGD 2.50 for a meal.

Fast forward today, you could still get a decent meal in Tokyo for between 800 and 1,000 yen, which is now around SGD 7 to SGD 9. Surprisingly, these price levels are almost equivalent to mixed vegetables rice (considered Singapore’s unofficial basic food index) sold at some locations.

 

In a way, we could describe that we had reached Japan’s level of (price) standards, but there is a macroeconomic explanation behind.

 

The Lost Decade(s)

 

Long story short, the meteoric rise of the Japanese economy post-Second World War ended with the burst of the asset price bubble in the early 1990s, sparking what was known as the “lost decade”. However, this decade did not really last 10 years; the economic stagnation lasted well into the 2000s, 2010s and into early 2020s, thus being dubbed subsequently the “lost 20 years” and “lost 30 years”. The Great Recession of 2008/2009, the Tohoku earthquake of 2011 and COVID19 pandemic of 2020-2021 had made worse these “lost” years.

 

Japanese inflation rates since 1991 till 2023, for the most part, never went above 1.5% annually, and with close to half the time went into negative region². On the other hand, Singapore’s inflation rate was at an average of about 1.73% year-on-year, with only 2 years of negative numbers, during the same period³.

 

With this, Singapore had overtaken Japan in terms of inflation, and coupled with the strengthening of the SGD against the Japanese Yen, that 1,000 yen now looked less expensive than before.

 

What Can We Learn From Here?

 

The term “equities will always go up over the long run” did not hold true for Japanese ones, until recently; using the Nikkei 225 index as a gauge, it did not return to its high as of Jan 1991 until around Nov 2020. To add, the highest peak achieved in Dec 1989 was not breached till just last month. 

 

Imagine as an investor who was all-in Japanese equities back then; he/she would not have recovered after factoring exchange rates. Hence it is important that we diversify not only among the asset classes, but also into different regions and countries, if your portfolio is sizable enough.

 

 

1 – Yearly exchange rates, Singapore Dollar per 100 units of Japanese Yen. Monetary Authority of Singapore.

 

2 – Japan Inflation Rate. 1960-2024. Macrotrends. https://www.macrotrends.net/countries/JPN/japan/inflation-rate-cpi (accessed 24 Apr 2024)

 

3 – MAS Core Inflation, 1990-2023. Monetary Authority of Singapore.