What We Can Learn From a Pork Cutlet

The Japanese are #1 on the Treasury’s list of U.S. bondholders, Japan has a record-setting debt-to-GDP ratio, and the yen has plunged in currency markets.

For these reasons, the Katsu Curry Index could come in handy.

The Yen’s Exchange Rate

Katsu Curry Index

Similar to the Big Mac Index, the Katsu Curry Index compares currencies. Recently created by a BNY Mellon Bank executive, it says the fast food pork and rice staple sold by the CoCo Ichibanya chain is more accurate than a burger or even currency markets when determining the yen’s exchange rate. On August 12, in global currency markets, one dollar was equal to ¥159.23. Instead, the Katsu Curry index suggested less undervaluation at ¥62.18. Then, as a third estimate, the Big Mac Index lists a ¥80.30 equivalent.

Through the following inverted scale, we can see the yen’s plunge:

Our Bottom Line: Purchasing Power Parity

When we compare economies, it can be helpful to recognize PPP (purchasing power parity) differences. Oversimplifying a bit, PPP is just a comparison of how much a basic currency unit can buy.

First, we just need to select one item like a Big Mac or CoCo Ichibanya’s pork cutlet with curry. Then, using one country’s price as our base, we can calculate the extent to which other currencies are over- or undervalued.

Or, returning to our title, through its PPP, a pork cutlet lets us calculate the yen’s value in foreign exchange markets.

My sources and more: Thanks to the BBC’s World Business Report for introducing me to the new Index, while Seeking Alpha and The Japan Times had more of the facts. And from there, The New York Times completed the story with its explanation of the sinking yen.