Just How Weak Is the Yen? 'Katsu Curry Index' Calculates $1 Equals Just 62 Yen

A senior strategist at BNY Mellon is using the price of Japan's affordable comfort food, 'katsu curry,' to measure just how weak the yen has become. As the effects of recent foreign exchange interventions gradually fade, this new indicator aims to reflect the actual impact of yen depreciation as felt by ordinary Japanese citizens.

Geoff Yu, a strategist at the bank, has created the 'Katsu Curry Index' as an alternative to the 'Big Mac Index.' He argues that comparing international prices of Japanese national dishes—comprising pork cutlet, rice, and curry—offers a more accurate reflection of how yen depreciation affects Japanese consumers' purchasing power than comparing hamburger prices across countries.

On Wednesday morning (the 12th), the global foreign exchange market saw one U.S. dollar trading at approximately 159.23 yen. However, according to Yu's calculation based on katsu curry prices and purchasing power parity, one dollar is effectively worth only 62.18 yen.

This suggests that the foreign exchange market is significantly underestimating the yen's true value. In contrast, the Big Mac Index—which calculates exchange rates based on McDonald's burger prices worldwide—indicates that one dollar should equal 80.30 yen.

Yu stated, 'If the goal is to align purchasing power with high-income countries, this index shows that the yen would need to appreciate substantially.' His calculations use pricing data from CoCo Ichibanya, the world's largest curry rice chain, which operates around 1,500 stores globally.

The Japanese and U.S. governments recently conducted their largest foreign exchange intervention in 15 years, attempting to pull the yen back from a nearly 40-year low against the dollar, making the yen a focal point in global currency markets. However, the yen has since given up about half of the gains achieved through the intervention.

With the yen at historic lows, many Japanese citizens face sharply increased costs for overseas travel and imported goods. Rising prices for food, services, and consumer products are also impacting daily living expenses.

Yu noted, 'If eating a plate of katsu curry or a bowl of ramen in Japan becomes too expensive to afford, the calls for a policy shift may grow louder.'

There are several other alternative indices based on purchasing power parity. For example, the 'Tall Latte Index' tracks Starbucks coffee prices around the world, while the 'KFC Index' was designed to more accurately measure PPP in African regions where Big Macs are less prevalent.