SO you're worried about the continuing slide of the dollar...

salmagundi

July 25, 1995

SO you're worried about the continuing slide of the dollar against other strong currencies, especially the yen. Take heart.

Paul W. Boltz, chief economist for Baltimore-based T. Rowe Price had some reassuring words on the subject, which he expressed in the company's most recent newsletter to its investors:

"Whenever the dollar is falling against the yen, the absurd notion that the Japanese are 'richer' than Americans resurfaces. The logic runs like this. The dollar's value in yen falls to, say, 85, and the figure 85 is divided into Japanese per capita consumption in yen. The resulting number is then compared with the U.S. equivalent, and the dismal conclusion is reached that the Japanese have passed us. The arithmetic and the conclusion are wrong.

"The problem with the calculation is that consumers in Japan cannot buy anything with dollars. They must use yen, so what looks like tremendous purchasing power measured in dollars has no way to be exercised. Japanese consumers buy products with very high prices in yen. For example, cantaloupes and other melons can cost the equivalent of $50. Yes, 50 American dollars. Melons, lovingly wrapped in tissue paper, are sold in gift boxes in Japan. It is a great honor to receive such a gift in Japan, but how many Americans expecting a wonderful present would be pleased to be handed a cantaloupe?

"Consider a taxicab ride in Tokyo. When the meter is turned on, the rider immediately owes 610 yen, about $7. Want a Big Mac? That will cost 320 yen in Tokyo, about $3.75. If you are thinking these might be unusual exceptions, it is notable that regular rice -- the staple of the Japanese diet served at virtually every meal -- costs the equivalent of $3 per pound . . . or roughly five times the price of regular rice in the U.S. The fact is the Japanese are rich only when they leave Japan. While Japanese tourists flock to Hawaii for honeymoons and vacations because prices are expressed in dollars, living standards for the citizens of Tokyo are far below those of Honolulu residents."

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