Cities Where the Dollar is Weakest
For Americans overseas, exchange rates and cost-of-living adjustments can make living overseas more expensive than back home
Tokyo was followed by Oslo, Norway, and Angola's capital, Luanda.
Tokyo, Japan's busy center of government, culture, and the economy, has been an expensive place to live for decades. Going to a movie theater costs about $22 per ticket, and renting a two-bedroom apartment easily costs $5,000 per month. Even travelers pay about $50 per night to sleep in capsule hotels, where guests stay in a "room" measuring about 2 meters (6 ft., 7 in.) deep, 1 meter wide, and 1 meter tall. As the yen has strengthened against the dollar, from 110 yen in August 2008 to about 90 yen to the U.S. dollar this month, the cost of living for foreign nationals paid in U.S. dollars has become tangibly more expensive in Tokyo.
In a new ranking by global human resource company ECA International, Japan's capital rose to become the most expensive city in the world for American travelers for the first time since 2005. The city's return this year was due largely to currency appreciation. Tokyo was followed by Oslo, Norway, and Angola's capital, Luanda. Exchange rates were also responsible for the rise in the cost of living in Seoul and Sydney, which climbed to 20th and 30th place, respectively, from ranks below 100 last year. Meanwhile, Manhattan, N.Y., the most expensive place in the U.S., fell 10 spots, to 29th place, as the U.S. dollar weakened.
"One of the major reasons for the volatility from the 2009 to the 2010 [ranking] was currency volatility over the past 12 months," says Lee Quane, regional director of Asia for ECA International. "We did see [some prices] increase, but it was pretty much benign."
Don't Forget the Beer
ECA International, which is based in London, surveyed 399 locations in September 2009 and March 2010 based on a basket of 128 goods, including groceries, transport, dining out, clothing, electronics, and such miscellaneous services as haircuts. Expenses such as rent, utilities, and school fees that are not typically included in a cost-of-living allowance were not counted. The survey focused on internationally recognizable brands—such as Kellogg's (K) cereal or Sapporo (SOOBF:OTC) beer—commonly purchased by expatriates.
While less-expensive options, such as local alternatives, are available, companies typically base the cost-of-living allowance on the amount needed to support a lifestyle similar to what a person had in the home country. Companies do not want employees to feel they are taking a loss to work overseas, says E. James (Jim) Brennan, senior associate at ERI Economic Research Institute in Redmond, Wash. "Accessing a certain product that is normally not found in that economy can be very expensive," he says. Other times, "the difficulty is not what the costs are, but what goods and services are available."
Also, depending on the situation, cheap alternatives are not always advisable. For example, the Centers for Disease Control & Prevention says illnesses such as typhoid fever can spread through contaminated water and food, so the center encourages travelers to avoid food from street vendors.
Depending on One's Lifestyle
How much one spends, of course, is often as much a choice as as a necessity. Ohio native Michael King, president of virtual computing company Citrix Systems' (CTXS) Japan operations, has worked overseas for the past 15 years and has been at his most recent assignment in Tokyo since January 2009. "Japan is always expensive," he says. "If you're paid in local currency, then it's less of a problem."
King says he pays about $15 for a U.S. magazine and $50 for a DVD. While leisure is certainly not cheap, food constitutes a large portion of his expenses. For convenience, King shops at expatriate grocery stores, where goods sell at a premium, and it is not uncommon for him to pay $50 for a steak. |
