Japan Keizai Series -

Why Japanese "feel less" prosperous.

1. Despite all the bad press regarding the Japanese economy, Japan's economy on a inflation adjusted per person basis, grew 10% from 2000 to 2009. 

2. Japan had zero inflation for 2000 to 2009.  Japan is the only major western country to do so

3. Overall prosperity from 2000 to 2009, measure in yen on a per capita basis grew 10%.

If this is true, then why do none of the Japanese people believe it  Here is why!

It has all to do with exchange rates and relative inflation  comparison to other western countries. 

1. In 1995, Japanese people GDP per person, measure in US dollars, significantly higher than  Americans (see chart)
2. Since then the yen has fallen in value.  In 1995, the yen to dollar rate exchange rate was 93, the same rates 14 years later at the end of 2009.  However, because if inflation is those 1995 dollars were 35% more valuable.  
3. In other a Japanese person's purchasing power when they visited the USA would be 35% less.
4. So, even though the Japanese economy grew on a yen per person basis from 1995 to 2008, measured in US dollars their "income" declined 25%..

The chart above and right compare Japanese and USA per capital GDP on an inflation adjusted basis all measure in US dollars.

For example, "peak to through", from 1995 to 2006, Japanese GDP per capita measured in "2005 US dollars" went from $51,360 to   $32,3702 - a 35% decline.  Stated another way, the 1995 Japanese economy, on a per person basis, measure in constant US dollars was 55% higher than it was in 2006.  This is actual an amazing difference and a significant decline.

Where Effect Seen - travel & imported luxury good.

So while the relative cost of living in Japan actually decreases, when Japanese had two very important areas of there life increase

• When Japanese people travel (and they like to travel) the feel relative more poor compared to 15 year ago.
• When they buy imported luxury goods (and they like luxury good) he feel relative more poor compared to 15 year ago

TO BE CONTINUE

See Japanese Inflation from 1879.