The falling yen means Japan is no longer a high-cost country
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Looking for a Black Friday or Cyber Monday bargain?
Don’t forget to check the stores… in Tokyo.
This autumn’s collapse in the Japanese yen on foreign exchange markets is turning up some surprising results in the real economy.
Among them: The price of an iPhone 6 is now lower at Apple’s AAPL, +0.03% Japanese Web store than it is even at its U.S. store.
It
is a general rule that Apple products are cheaper here in the U.S.A.
than in other developed markets overseas, and for the most part that
still holds true. The basic 16 gigabyte iPhone 6, which costs $649
without a contract from Apple’s U.S. website, costs considerably more at
almost every other Apple website overseas.
When you convert the local currency back to U.S. dollars, the same iPhone will cost you $720 in Hong Kong, $790 in Singapore, $870 in Germany, and just about $900 in Italy. Even in the United Arab Emirates, generally bargain central for these things, it’s $710.
But in Japan it’s just $640.
It’s not an apples to apples comparison because there’s sales tax on top of that, and no one is going to fly to Japan in order to save $9 anyway.
(Oh, and of course there’s my general complaint about Christmas as a shopping season, which has probably fallen on deaf ears anyway.) Read: Let’s steal back Christmas.
But those of us who are used to thinking of Japan as one of those high-cost places, like Switzerland, may need to start thinking again.
It’s not easy buying things online from Japan but I recently purchased an item there for the simple reason that it was no longer available in the U.S. An online company, Zen Market, handled the transaction and my item arrived within five days. The costs were not high.
A while back I facedesked after Sony launched a brilliant new product, its huge e-Ink Digital Paper, and then priced it to fail at $1100. Sony recently cut the price in the U.S. to $999, which is still ridiculous. The price in Japanese yen is now less than $850, and by my math it could be delivered to the U.S. for a total of just over $900.
The yen is plunging against the dollar because Japanese prime minister Shinzo Abe has just unveiled his second round of “quantitative easing,” meaning he is effectively going to print a lot more yen in order to stimulate the economy. Meanwhile the Federal Reserve here has just stopped its own QE policy, at least for now.
The effect on the yen is
remarkable. The yen has plummeted almost ten percent against the dollar
in less than a month. One U.S. dollar will now buy 118 yen — nearly 50%
more than two years ago, before “Abenomics” began.
Naturally all forecasts are about as useful as a chocolate fire guard or a paper umbrella, but nonetheless various seers on Wall Street are predicting the yen will tumble further, to 130 or more, if Abe wins his forthcoming election and ramps up his easy-money policies.
The immediate and mild implication is that the day may come when, instead of Japanese tourists coming to America to shop, we all go there. Well, sillier things have happened.
The more serious implication is that as Japan stimulates its economy by devaluing its currency, so it risks a beggar-thy-neighbor chain reaction among others. This is what happened during the Great Depression. The Economist magazine likes to compare prices in different countries using a Big Mac Index — in other words comparing the price of a Big Mac in different cities. Our iPhone Index is in a similar vein. It’s only illustrative, but it nonetheless casts an intriguing light on where this may be heading.
Don’t forget to check the stores… in Tokyo.
This autumn’s collapse in the Japanese yen on foreign exchange markets is turning up some surprising results in the real economy.
Among them: The price of an iPhone 6 is now lower at Apple’s AAPL, +0.03% Japanese Web store than it is even at its U.S. store.
When you convert the local currency back to U.S. dollars, the same iPhone will cost you $720 in Hong Kong, $790 in Singapore, $870 in Germany, and just about $900 in Italy. Even in the United Arab Emirates, generally bargain central for these things, it’s $710.
But in Japan it’s just $640.
It’s not an apples to apples comparison because there’s sales tax on top of that, and no one is going to fly to Japan in order to save $9 anyway.
(Oh, and of course there’s my general complaint about Christmas as a shopping season, which has probably fallen on deaf ears anyway.) Read: Let’s steal back Christmas.
But those of us who are used to thinking of Japan as one of those high-cost places, like Switzerland, may need to start thinking again.
It’s not easy buying things online from Japan but I recently purchased an item there for the simple reason that it was no longer available in the U.S. An online company, Zen Market, handled the transaction and my item arrived within five days. The costs were not high.
A while back I facedesked after Sony launched a brilliant new product, its huge e-Ink Digital Paper, and then priced it to fail at $1100. Sony recently cut the price in the U.S. to $999, which is still ridiculous. The price in Japanese yen is now less than $850, and by my math it could be delivered to the U.S. for a total of just over $900.
The yen is plunging against the dollar because Japanese prime minister Shinzo Abe has just unveiled his second round of “quantitative easing,” meaning he is effectively going to print a lot more yen in order to stimulate the economy. Meanwhile the Federal Reserve here has just stopped its own QE policy, at least for now.
Holiday cocktails: the pumpkin-infused 'beast'
Pumpkin-infused vodka adds a pop of color to an autumn drink called "The Beast."Naturally all forecasts are about as useful as a chocolate fire guard or a paper umbrella, but nonetheless various seers on Wall Street are predicting the yen will tumble further, to 130 or more, if Abe wins his forthcoming election and ramps up his easy-money policies.
The immediate and mild implication is that the day may come when, instead of Japanese tourists coming to America to shop, we all go there. Well, sillier things have happened.
The more serious implication is that as Japan stimulates its economy by devaluing its currency, so it risks a beggar-thy-neighbor chain reaction among others. This is what happened during the Great Depression. The Economist magazine likes to compare prices in different countries using a Big Mac Index — in other words comparing the price of a Big Mac in different cities. Our iPhone Index is in a similar vein. It’s only illustrative, but it nonetheless casts an intriguing light on where this may be heading.
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