Japan Big Mac Index harbinger?

[mooncliff]

Big Macs are on sale for 200 yen, which would be an implied PPP of 50 yen to the dollar!
It has been around 85 yen to the dollar for the last year or so.

http://www.oanda.com/currency/big-mac-index


Wow, their website really sucks.
http://www.mcdonalds.co.jp/


Deflation continues as far as I can see.

http://www.latimes.com/business/la-f...769,full.story

[c1ue]

Re: Japan Big Mac Index harbinger?

Big Macs are on sale for 200 yen, which would be an implied PPP of 50 yen to the dollar!
It has been around 85 yen to the dollar for the last year or so.

http://www.oanda.com/currency/big-mac-index

I hate to burst your bubble, but the Economist's table is inconsistent with its own methodology.

Implied PPP is defined in the link as:

+ The Purchasing Power Parity (PPP) rate is the local Big Mac price divided by its price in the United States. Prices and their corresponding implied PPP rates are the latest figures available from The Economist.

In the table, the Japan Big Mac is 3.8107 whereas the US Big Mac is 3.73.

According to the definition, it implies a PPP of 1.02 - consistent with the 2% overvaluation of the yen. So apparently the PPP listed in the link includes some unknown fudge factor.

Secondly even with the Big Mac on sale - itself not relevant unless the price is permanent as opposed to just a loss leader - still results in a ratio of 0.63 = 37% undervaluation.

But of course this over/under valuation has nothing to do with deflation.

This is just a relative price.

If McDonald's Japan cut its list prices, then it would be deflation.

A sale by definition is not.

[mooncliff]

Re: Japan Big Mac Index harbinger?

I'm joking. I actually think the Big Mac index is silly and laughed when I saw the commercial on TV last night. I haven't had one in years because it is just too much... only a few days left...

[touchring]

Re: Japan Big Mac Index harbinger?

I'm joking. I actually think the Big Mac index is silly and laughed when I saw the commercial on TV last night. I haven't had one in years because it is just too much... only a few days left...

The big mac index is really an index for expats, how often does a Japanese eats a big mac?