The Surprising Truth About Japan’s Stagnant Economy – And Why It Might Be Great For American Expats

Japan has been struggling with deflation and low economic growth for over 30 years. Since the early 1990s, the country’s GDP per capita has actually decreased from a peak of $44,210 in 1995 to just $33,949 today.

In contrast, the US GDP per capita has nearly tripled over that same period, from $28,671 to $80,412.

Japan’s Decades-Long Battle With Deflation

Economists generally agree that deflation can have very harmful effects on an economy. When prices are constantly falling, it incentivizes people and businesses to hoard cash rather than spend or invest it, since that cash will be worth more in the future.

This leads to decreased consumer spending and business investment, which further depresses the economy. It also makes existing debts harder to pay off over time.

To combat deflation, Japan’s central bank has kept interest rates at or near 0% for many years. The goal is to disincentivize saving and encourage spending and lending to stimulate the economy. However, these measures have had limited success in kickstarting significant inflation or economic growth in Japan.

The Upside of Deflation For Residents

While Japan’s stagnant economy is concerning on a macro level, it has some surprising benefits for people living there, including expats. Compared to the US, the cost of living in Japan is quite reasonable, especially considering it is a highly developed country.

Deflation means that prices for consumer goods have stayed low. Coupled with a strong US dollar compared to the Japanese yen (currently around 150 yen to 1 USD), American expats can enjoy a comfortable lifestyle in Japan for less money than in the US.

For example, a decent meal at a restaurant in Japan averages around 1000 yen, or less than $7. A nice one-bedroom apartment can be rented for under $1000 per month in many cities. High-speed internet costs around $30-40 per month. Groceries and household goods are also very affordable.

Additionally, deflation provides more stability compared to inflation. Residents don’t have to worry about prices suddenly spiking or their purchasing power being eroded over time. Necessities remain affordable year after year.

Not Everything Is Cheaper

There are some notable exceptions to Japan’s low costs. Cars tend to be expensive compared to the US due to higher taxes. Gas currently costs around $4.25 per gallon.

Fresh fruits like strawberries and melons are also quite pricey, often considered luxury gift items. A nice cantaloupe might sell for over $20. Imported foods also cost more than local products.

Real estate prices in the hearts of major cities like Tokyo are still high, though not as bad as New York or San Francisco. Buying a condo or house is out of reach for many.

The True Cost of Economic Stagnation

The downside is that Japan’s lackluster economy means fewer opportunities for career advancement and salary increases compared to the US. The unemployment rate is low at around 3%, but so is job mobility. Wages have stagnated for decades. Most expats still find they have a higher standard of living than at home, but they aren’t necessarily getting ahead either.

The government also has a huge national debt, more than twice its GDP, due to stimulus measures and an aging population. How Japan deals with this debt long-term remains to be seen.

But overall, Japan’s “Lost Decades” of deflation aren’t quite so bad on an individual resident level. Expats enjoying a nice lifestyle for less money than back home might be hoping the stagnation lasts a while longer.

User Comments:

“When I moved to Tokyo, I was surprised how affordable many things were compared to LA. My rent is half what it would be back home for a comparable place. Don’t expect to live like a king on an English teacher’s salary, but you can live pretty comfortably.”

“Fruits and vegetables, especially ones like celery, asparagus, broccoli, can be super expensive in Japan since there isn’t much land suitable for farming. I stick to locally grown produce to keep my food budget down. But I love that going out to eat is so affordable!”

“I think the downsides of deflation are a bit overstated for the average person. Sure, my salary isn’t going up much, but at least I’m not losing ground to inflation. My rent has stayed the same for the past 5 years. And my quality of life here in Osaka is way better than it was in the US.”

“It’s not all cheap of course. I was shocked at the prices of melons the first time I went to a department store! But you learn what’s good value and what to avoid. Overall, your money goes further in Japan once you adjust to the differences.”

“If you’re hoping to land a lucrative expat package with a big US company, you might be disappointed. Those opportunities seem to be dwindling. But if you can find a decent job, you’ll enjoy a good standard of living here without breaking the bank. Just don’t expect to save a ton.”