Rents go down, grocery bills shrink, companies lay off workers and people move away to live in the countryside — and yet somehow Tokyo continues to be the world’s most expensive city for expatriates to live in. Most of the blame can be placed firmly on the relentless strength of Japanese currency against the U.S. dollar, according to the annual cost of living survey by international human resources consulting firm, Mercer.
The capital shot back to top of the chart, swapping runner-up position with the Angolan capital of Luanda, which came first last year. Other Japanese cities — Osaka and Nagoya — also placed in the top 10. The results show that, all in all, Japan is one of the most expensive countries on earth for expats.
It’s no wonder. Mercer’s findings are based on “the relative strength of the relevant currency” against the U.S. dollar in the 12 months between rankings, as well as price fluctuations over the same period, using New York as a benchmark. The survey covers 214 cities across five continents. According to data from the Bank of Japan, the average dollar rate for the survey’s most recent period through February 2012 was ¥78.9, an 8.6% decline from the previous year.
Japan hasn’t been a cheap place to live for a long, long time. This was the 12th year Mercer ranked Tokyo most expensive city since 1994, including four years running through 1997, when the dollar averaged ¥122.9. Even when it hasn’t been No. 1, Tokyo has ranked among the top three every year except 2007, when it dipped to fourth.
To be sure, living here doesn’t need to break the vault. There are ways to bargain-bin your way through the daily grind, with ¥500 lunch boxes, living in smaller accommodations outside of the city center, and avoiding taxis at all costs.
But costs for even smaller items can pinch. According to Mercer, you can buy two cups of coffee in New York for what it costs to buy one in Tokyo — $8.29. That is more than any other major Asian city ranked in the top 10.
Tokyo is also the most expensive place to watch a movie. Admission is an average of $22.97, about $3 more than in Sydney, the next most costly city to catch a film.
Yet Tokyo real estate is a steal compared with Hong Kong and Luanda, where the monthly rents for a luxury two-bedroom unfurnished apartment are $7,092 and $6,500, respectively. Still, Tokyo’s average monthly rent — $4,847 — is the third-highest, even as rental prices have fallen “as people relocated from the affected area to the south of Japan” following last year’s earthquake and tsunami disasters.
Currencies were the deciding factor in the regional rankings as a whole. Asia dominated while Europe lost ground. Singapore and Hong Kong kept their places among the top 10, and the strengthening yuan pushed Chinese cities up. Shanghai climbed five spots to No. 16 and Beijing was just behind at No. 17. Meanwhile, European cities dropped — London was down seven rungs to 25 and Paris came in at 37 as the euro and other local currencies weakened.
Karachi was the cheapest place to live, less than a third of the cost of Tokyo.