"With Exchange Rates in Turmoil, Why Talk About Curry?"...A Bowl Reveals the Yen Should Be 62, Not 159

'Tonkatsu Curry Index' Emerges for Measuring Yen Value


New Purchasing Power Index Developed by BNY Mellon Strategist

Benchmarked Against 1,500 Outlets of World's Largest Curry Chain

"When the Cost of a Bowl Becomes Unbearable, Bac

As the Japanese yen has fallen to its lowest level in 40 years, a new index has emerged that measures exchange rates using tonkatsu curry instead of the Big Mac.

Image of Tonkatsu Curry from Coco Ichibanya, a Japanese curry rice chain. Official website

On August 12 (local time), Yonhap News, citing Bloomberg, reported that Jeff Yu, Chief Strategist at Bank of New York Mellon (BNY Mellon), developed and is utilizing an index that compares purchasing power across countries based on the price of tonkatsu curry, inspired by The Economist's 'Big Mac Index'.

The reference point for the index is Coco Ichibanya, the world’s largest curry rice chain with about 1,500 stores worldwide. Yu explained, "The Big Mac is still consumed far more in the West than in the East," adding, "In Asia, curry rice is a much more popular fast food option."

The results of the 'Tonkatsu Curry Index' calculations diverged significantly from market exchange rates. On this day, the international foreign exchange market traded 1 dollar at around 159 yen, but according to this index, the equilibrium rate came out to 62.18 yen per dollar. Even when compared to the 'Big Mac Index,' which suggests 80.3 yen per dollar, this indicates that the yen is significantly undervalued. Yu stated, "If the price of a bowl of tonkatsu curry or ramen in Japan becomes unaffordable, there will be increasing calls for a policy shift."

On the 3rd, a citizen passed by an electronic board displaying the exchange rate between the US dollar and the Japanese yen in front of a securities firm in Tokyo. Photo by AP Yonhap News

The yen fell to 163 yen per dollar last month but rebounded to 155 yen following coordinated intervention by the U.S. and Japan. However, in less than two weeks, about half of those gains were given up, and the yen fell back to the 159 yen range. That intervention was described as the most forceful in 15 years, marking the first time since 1998 that the two countries jointly bought yen. It was also unusual that the New York Federal Reserve bought yen by selling euros in the euro-yen market, rather than intervening directly in the dollar-yen market.

The short-lived effect of the intervention is attributed to the revival of the 'carry trade,' where investors borrow low-interest-rate currencies and invest in higher-yielding assets. As long as the interest rate gap between the U.S. and Japan remains wide, the incentive persists. The yield on 10-year U.S. Treasury bonds is 4.686%, compared to just 2.846% for Japanese Government Bonds of the same maturity. Jasper Koll, a strategist at Monex Group, commented, "The intervention may have rattled markets, but it failed to alter the fundamental rule of finance that money flows to where returns are highest."

Some analysts suggest that the real motive behind the U.S. government’s intervention was to protect the U.S. Treasury market rather than defend the yen. The funds used to buy yen typically come from selling U.S. Treasury holdings owned by Japan, and if large volumes of treasuries are released into the market, their yields rise. The fact that dollar assets were not touched also suggests a desire to reduce the need for Japan to sell U.S. Treasuries.

U.S. Treasury Secretary Scott Bessent has been plugging funding gaps with short-term Treasuries, helping keep interest rates down ahead of the midterm elections in November. As the national debt has reached 123% of GDP, based on total liabilities, the capacity for further currency intervention is diminishing.

As a result, market attention is turning to the Bank of Japan (BOJ) monetary policy meeting scheduled for next month. A significant rate hike would narrow the interest rate gap between the two countries, making the carry trade less attractive. Masahiko Ryu, Senior Bond and Currency Strategist at State Street Global Advisors, defined 160 yen as a "political red line," adding, "If movements become abrupt or disorderly, further intervention cannot be ruled out. But any such move would only buy time—the heavy burden will ultimately fall on the Bank of Japan in September."

This content was produced with the assistance of AI translation services.