How Cheap Is the Yen Really? A Plate of Curry Rice Reveals the Harsh Truth Behind the Currency's Market Value vs. Public Perception

How undervalued is the Japanese yen? A senior strategist at BNY Mellon has developed the 'Katsu Curry Index,' using Japan's beloved national dish—pork cutlet curry—as a benchmark to measure the yen's actual purchasing power. The results suggest that the yen's weakness in foreign exchange markets may be far more pronounced than exchange rate figures alone indicate. Bloomberg reports that the yen has recently become a focal point in global forex markets, despite the U.S. and Japan conducting their most notable joint intervention in 15 years to prevent the yen from falling to a 40-year low against the dollar. However, the appreciation triggered by the intervention has since faded by about half, and the yen is once again facing downward pressure. As of Wednesday morning, the dollar-yen exchange rate stood at approximately 159.23, meaning 1 U.S. dollar could be exchanged for about 159 yen. Yet, according to purchasing power parity (PPP) calculations by BNY Mellon senior strategist Geoff Yu based on pork cutlet curry prices, the fair exchange rate should be only 62.18 yen per dollar. This implies a significant discrepancy between the yen's current market valuation and its actual purchasing power. This result is even more extreme than the widely known 'Big Mac Index' by The Economist. Based on global McDonald's Big Mac prices, the fair dollar-yen exchange rate is estimated at around 80.30—still far below the current 159.23. Why use pork cutlet curry to measure the yen? Yu argues that compared to burgers, pork cutlet curry may better reflect the real impact of yen depreciation on daily life in Japan. He used pricing data from CoCo壹番屋, Japan's largest curry rice chain, comparing prices across different countries. The brand currently operates around 1,500 stores worldwide. 'If the goal is to align purchasing power with high-income countries, this index suggests the yen would need to appreciate significantly,' Yu said. The concept behind this index is the same as the Big Mac Index—using the price of the same product across countries to observe differences in currency purchasing power. For Japan, a plate of pork cutlet curry may be a more accurate reflection of consumers' everyday lives than a hamburger. The yen's prolonged weakness has not only drastically increased the cost of overseas travel and imported goods for Japanese citizens but is also gradually affecting domestic living costs. Rising prices in dining, services, and consumer goods all indicate that yen depreciation is eroding the real purchasing power of Japanese households. Yu warns that if even a plate of pork curry or a bowl of ramen begins to feel unaffordable to Japanese consumers, calls for policy changes from the government could grow louder. Beyond the Big Mac: The 'Latte Index' and 'KFC Index' Measuring currency purchasing power through a single product is not new. In addition to The Economist's Big Mac Index, other 'informal exchange rate indicators' have emerged globally. For example, the 'Tall Latte Index' compares purchasing power using Starbucks coffee prices, while the 'KFC Index' serves as an alternative metric for African markets, where McDonald's has limited presence and the Big Mac may not be a suitable benchmark. However, neither the Big Mac Index nor the Katsu Curry Index are formal models for predicting exchange rates. What's truly noteworthy is that when the market exchange rate diverges so dramatically from the purchasing power ordinary citizens experience in daily life, it underscores the economic and policy pressures stemming from the yen's prolonged weakness. More exclusive insights from Wind Media: • Customers can't afford AI chips anymore! NVIDIA teams up with Wall Street on a $500 billion financing plan—what risks are hidden? • AI data centers scramble for land and power, but now face a new hurdle: Wall Street starts factoring in 'local opposition' as a financing risk • Is U.S. debt pressure becoming unbearable? Besent makes consecutive moves—Wall Street begins sensing something is off