Japan has gained a reputation as having a high cost of living, possibly due to surveys such as this one released in late June by global consulting firm Mercer. For the second year in a row, it picked Tokyo as the city with the world’s second-highest cost of living (behind Hong Kong).
For many people who are thinking about moving here, this kind of press hampers them with the question, “Can I afford to live in Japan?” The answer is “yes!”
You can afford to live in Japan if you live like a local
The cost of living measures the balance between how much money you need to spend to live your daily life and the amount of money that you earn. It goes without saying that the higher the cost of living, the less money you have leftover.
The problem with Mercer’s calculation is that it is based on the expat lifestyle, complete with steak dinners and Big Macs. “High costs for expatriate consumer goods” is one of the reasons it gives for Asian cities leading its 2019 Cost of Living Survey.
Our calculation is based on local data, so that you can work out what it costs to live in Japan, not just on the glossy surface of its capital.
What is the average expenditure for a household in Japan?
So, what do you spend your money on? Although we all have our own unique spending idiosyncrasies, we also have many common expenditures, such as food, rent, utilities, health care, and taxes. Calculating these will give us a figure for the cost of living in Japan.
The latest data on food spending from the Japanese Ministry of Internal Affairs and Communications shows that between January and May 2019, average national food and drink expenses for a household of two was ¥65,994 a month. That included ¥5,326 for cereals such as rice, bread, and noodles, ¥11,977 for meat and fish and ¥8,692 for fresh fruit and veg.
|Average Monthly Expenditure for Food||¥65,994|
|Salt-dried seafood products||¥1,114|
|Surimi based products||¥708|
|Other seafood processed products||¥891|
|Vegetables and Seaweed||¥8,673|
|Soybeans processed products||¥1,113|
|Other vegetables, seaweed processed products||¥1,144|
|Fruit processed products||¥289|
|Fats and oils and seasonings||¥3,224|
|Conditioned staple food||¥3,676|
|Other pre-cooked food||¥5,097|
|Coffee and cocoa||¥853|
Utilities, including electricity, gas, and water, cost ¥19,795 on average per month for two. Although we can’t do without these services, we can conserve our usage and trim our expenditures that way. Check out our tips on saving money in Japan article for ways to do that.
|Average Monthly Costs for Utilities||¥19,795|
The post also gives some hints on how to reduce transport and communications services, which the data estimate at ¥15,608 a month.
Other monthly expenditure figures include ¥9,992 for furniture and household products, ¥8,264 for clothing and footwear, ¥14,071 for health care supplies and equipment and ¥49,395 for miscellaneous spending such as beauty services and entertainment.
All these expenditures add up to a total of ¥183,119 for two people. Or ¥91,560 for one person if we half that and round up. To that, we need to add the sizeable sums of rent, taxes and social insurance.
What about rent in Japan?
One of our biggest living costs is rent. Tokyo is home to Japan’s most expensive properties, as all realms of real estate – offices, shops, housing – compete for space in the metropolis. Data from Japanese real estate leasing company Apamanshop tell us that average monthly rent for a one-room (1R), or studio apartment in Tokyo is ¥89,500. It drops to around half in Osaka, at ¥44,800, and further still in one of Japan’s most rural areas, Hokkaido, where it’s just ¥32,300. The average of these three figures is ¥55,533.
Save money by living in Kanagawa and working in Tokyo
One way to keep a little more cash in your wallet is to earn a Tokyo salary but pay a Kanagawa Prefecture rent. Yes, you will have to commute, but as the rent data shows, for a studio apartment, you would pay on average less than half the rent of a Tokyo one. If your employer pays for your commute, that is a huge saving.
If you are determined to have an address within the 23 wards, read our average rent in Tokyo in 2019 article to find out which areas within Tokyo offer the best prices. Or consider living in shared accommodation.
Comparatively speaking, Tokyo is expensive to live in, but it consequently has the highest regional minimum wage in Japan.
Its costs will top our average figures, just as many rural areas will cost less.
You’ll spend almost half of your salary on taxes, pensions and health insurance in Japan
This is the last piece of our cost of living calculation. All of these taxes and fees vary according to factors including salary, location and the presence of dependents. We’ll calculate a general figure here, but you can check further details in the Japan 101 article that covers them.
Income tax is calculated on a percentage basis according to the level of one’s salary. Annual earnings in the range of ¥3,300,000 – ¥6,950,000 are taxed at 20 percent. According to an earlier article in this series, the average salary in Japan is ¥4.14 million and fits into that bracket. The average teaching salary is lower. At ¥3.21 million, it falls into a range that is taxed at 10 percent.
Along with income tax, a prefectural tax of about 4% is also deducted. At the local government level, residence tax leeches another 6%.
Full-time employees have a further 10 percent removed from their paycheck to cover the Employees’ Health Insurance and Pension, which also includes unemployment insurance. Even those not working full-time are required to be enrolled in a form of health insurance and the national pension system.
Based on the average annual salary, these taxes add up to 40 percent of income. Broadly speaking then, that’s around 40% of your earnings taken care of.
So how much does it cost a person to live in Japan?*
If we divide the average annual salary by twelve, we get a pre-tax monthly income of ¥345,000.
To roughly calculate the average monthly cost of living, we take 40 percent of that, ¥138,000, which roughly equates to expected average tax payments from October, add the average Japanese rent of ¥55,533 and daily expenses of ¥91,560.
That’s a total of ¥285,093 as the average monthly cost of living in Japan.
This leaves us with ¥59,907 from our salary—meaning that yes, you can afford to live in Japan. And possibly even save money, too.
*Note that these calculations are based on averages worked out from the sourced data. How much it will cost you depends on many variable factors. But the point is that Japan is very much an affordable place to live in 2019.
Will Japan be cheaper or more expensive to live in the future?
There is still a chance that the planned October consumption tax rise from 8 percent to 10 percent will not eventuate. Many observers criticize the plan for its potential to further chill consumption. The latest data for the core consumer price index, released on July 19, showed the slowest pace of growth in nearly two years, with a 0.6 percent on-year rise in June. However, the reports are conflicting with some suggesting that Shinzo Abe will follow through with the planned tax hike. So the possibility of price rises eating into our earnings remains on the horizon.
The exception to that is Tokyo rent, which has been rising and is expected to continue its ascent as families and elderly people move to its central wards, in particular.
Overall wage growth, however, is slow. In May, inflation-adjusted, real wages fell 1.0 percent for the fifth straight month of declines, according to data from the labor ministry. At a time when the global economy is riddled with uncertainties, Japanese companies are reluctant to hire full-time workers amid concerns over the outlook for the economy. They are therefore hiring part-time workers and giving pay raises to full-time employees in the form of one-off special payments, rather than increases in basic pay.
It is a time of number-crunching throughout Japan for households, as well as businesses.
Under such conditions, it is a good idea to have a career strategy in place to move you up the earnings scale. Read our earlier article in this series, What Is the Average Salary in Japan in 2019? to learn which job fields will earn you more.