BNY Mellon’s ‘Katsu Curry Index’ Puts Fair Dollar-Yen Rate at 62.18, Underscoring Yen Undervaluation

The yen appears deeply undervalued in the foreign-exchange market when measured against the price of katsu curry, a staple Japanese dish.

Bloomberg reported on August 11 that Geoff Yu, chief strategist at BNY Mellon, created the “Katsu Curry Index” to gauge the yen’s purchasing power using the price of Japanese pork cutlet curry.

The index mirrors The Economist’s Big Mac Index, which compares burger prices across countries to assess currencies’ purchasing power. Yu said katsu curry, a dish more familiar to Japanese consumers than hamburgers, may better reflect how the weak yen is felt in Japan.

Based on menu prices at Coco Ichibanya, the world’s largest curry chain, Yu calculated a purchasing-power fair value of 62.18 yen per dollar. With dollar-yen trading around 159.23 that day, the measure suggests the Japanese currency is substantially undervalued relative to its purchasing power.

That points to a stronger yen than the Big Mac Index, which implied a fair value of 80.30 yen per dollar.

“If the goal is to bring purchasing power in line with high-income countries, this index shows the yen should be much stronger than it is now,” Yu said.

The yen has recently surrendered about half of the gains it made after joint US-Japan intervention in the foreign-exchange market. Authorities in the two countries had earlier carried out their largest coordinated intervention in 15 years after the yen fell to its weakest level against the dollar in four decades.

The yen’s prolonged weakness has raised the cost of overseas travel and imports, while also adding pressure to living costs in Japan, including food and services.