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Economy

Cheap Japan: From Disney to Big Macs, prices are frozen in time

Global bargain attracts hordes of international visitors

A year-end countdown at Tokyo Disneyland: The theme park's entrance fees are cheaper than U.S. Disney parks.    © Disney

TOKYO -- Long labeled expensive, Japan is now drawing attention for its low prices.

Take Tokyo Disney, which has become a popular tourist destination in part because of its relative cheapness. One adult single-park ticket for same-day entry cost the equivalent of $69 on Oct. 31 -- barely more than half the $129 price tag at Disneyland in California and the cheapest for that date of the six Disney resorts examined by Nikkei, including locations in Paris and Shanghai.

Oriental Land, the operator of Tokyo Disney, says it regularly surveys parkgoers' opinions of ticket prices and sets prices in line with the value of the park.

Goods and services that are often markedly cheaper than those in other countries are among the factors driving Japan's recent tourism boom. Spending by foreign visitors tripled to 4.52 trillion yen ($41.6 billion) in 2018 from 2013 .

Yet while low prices have some benefits, they are a sign of underlying malaise. Corporate Japan's reluctance to raise pay has contributed to the minimal-to-negative inflation that has dogged the country for decades.

This trend is also apparent elsewhere in the leisure industry. In London, a room at a five-star hotel with a king-size bed and 50 sq. meters of space can cost as much as $1,500 for two adults, based on a search for the night of Dec. 13. A similar room in Tokyo could be had for $700 or so.

On the other end of the spectrum is Daiso, the chain of 100-yen shops run by Daiso Industries that has expanded to 26 countries and regions.

Products that sell for less than $1 at Japanese locations cost $1.50 or more in the U.S., 7.99 real ($1.93) in Brazil and 60 baht ($1.97) in Thailand. Prices are higher even in China, at 10 yuan ($1.42), even though many Daiso products are made there.

Similar bargains can be found across the retail sector. "Japanese appliances and cosmetics are cheap -- they're good buys," said a Chinese tourist surnamed Li visiting Tokyo's ritzy Ginza district.

An annual membership to Amazon.com's Amazon Prime service, which includes such benefits as exclusive movies and free delivery, costs $119 in the U.S. The price in Japan, while raised in April to about $45 from $36, remains vastly cheaper.

Such differences have frequently been chalked up to a soft yen.

The Big Mac Index developed by The Economist uses prices of the ubiquitous McDonald's burger as a measure of respective currency valuations, on the assumption that identical products should be priced the same throughout the world.

Big Macs, here seen with additional patties, are a global measure of respective currency valuations, on the assumption that identical products should be priced the same throughout the world.

Data released in July put the price of a Big Mac at 390 yen in Japan and $5.74 in the U.S., for an implied exchange rate of 67.94 yen to the dollar. The actual rate was around 110 to the dollar, indicating that the yen is undervalued by well over 30% against the greenback. That means a Big Mac priced in dollars is that much more expensive for a shopper with yen.

Applying this idea to Disneyland tickets shows the Japanese currency as 46% undervalued against the dollar. Based on Daiso prices in Thailand and Japan, the yen is more than 50% undervalued against the baht.

Yet "the price gap now can't be fully explained by exchange rates," said Toshihiro Nagahama, chief economist at the Dai-ichi Life Research Institute.

Comparatively stronger wage growth would offset weakness in purchasing power. But Japan has underperformed on this front.

When real wages are indexed with 1997 as the base year, the 2018 figure for Japan comes to 90.1, according to data from sources including the Organization for Economic Cooperation and Development. The U.S. and U.K. indexes rose to 116 and 127.2, respectively, over the same period.

Slow-to-negative wage growth gives workers little incentive to spend more, leading to weak inflation and a stagnant economy.

Big companies remain leery of increasing pay. Toyota Motor reconsidered its longtime custom of uniform across-the-board raises in 2019's spring wage negotiations. And with the U.S.-China trade war and other factors weighing on earnings in the manufacturing sector, some companies are signaling that broad-based hikes will be unlikely next year.

Meanwhile, in Thailand, Daiso has passed on the cost of rising wages and rents to customers through higher prices. Yet these pose little burden for a middle class with growing purchasing power.

Japan is cheaper because it is being left behind by global growth.

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