Terrie's Job Tips -- Cost of Living in Tokyo 2008 - Part One: High End

Some years ago I wrote about the cost of living in Japan - mainly for the benefit of those who are being hired outside the country. By covering some of the typical structuring and perks, though, I hope this article will be useful for those of you negotiating new terms with your employers - especially if you work alongside expat colleagues who probably are on these terms. If nothing else, you can tell the boss how much cheaper it will be to give you a pay raise than to bring in another expat!

We start first with the high end of the home budget spectrum. Now, by this I don't mean the high end of salaries, but rather the high end of personal costs. The fact is that there is no family unit more costly to maintain as a foreigner in Tokyo than a wage earner with a family of school-going children. If you have more than 3 kids, you may even find that the costs outstrip your once significant salary. One way around such sky-high costs is to leave your family behind in your home country. This might work if you can travel home on a regular (weekly or monthly) basis - in Hong Kong such people (usually dads) are called "astronauts".

Another solution is to live far from Tokyo, and put your kids into Japanese schools - in other words, living like a Japanese salaryman. But it's fair to say that most foreign executives don't make ideal candidates for Japanese salaryman lifestyles, and instead are looking for a fuller expat lifestyle. It is for these people that I have given the example costs below for.

A. One-time costs:

1. New 4WD "soccer mom" car including registration - JPY10M
2. Apartment deposit, 150 sq. m., good central location (5 months rent and 1 month in advance) - JPY4.5M
3. Furniture for 4 (modest budget, supplemented by a container of stuff you ship from your home country) - JPY5M
4. International school/kindergarten yearly - JPY2.5M x 2 kids
5. Foreign Club membership (sports and social facilities) - JPY2m

B. Monthly costs:

1. Apartment rent (2- or 3-bedroom), Hiroo, Shibuya, or similar - JPY750K/month
2. Food for 4, including substantially Western diet items - JPY200K/month
3. Eating out for 2, once a week plus baby sitter - JPY120K/month
4. Gas, car maintenance - JPY50K/month
5. Clothes, utilities, misc. - JPY100K/month
6. Clubs, other entertainment - JPY50K/month
TOTAL: JPY1.27M/month => JPY15.24M

So your first year in Japan could cost as much as JPY41,740,000 (US$380,000), but once you're past that initial set-up cost, then the annual bills before putting any savings aside, would be around JPY15M-JPY16M.

Remember that we still have taxes and social security to take into account. Based on the number of dependents and other tax deductions, the final figures will be different for everyone, but to have an expat lifestyle the example above (and we haven't added in personal purchases, private health, retirement costs, trips, etc.), from Year Two onwards, you'd be wanting to have a minimum salary of JPY20M-JPY22M annually. Not coincidentally, this happens to be a typical base wage for a Country Manager or similarly high-level executive for a foreign firm in Japan.

So how can you reduce these amounts and how do others afford to live in Japan? Firstly, if you are coming in from overseas, ask your company to help with the deposits on the apartment. After cleaning and restoration fees, they will get about 50%-70% back again once you leave Japan, so providing they have the local capital to do it, providing this upfront cash would not make a major difference to their balance sheets.

Secondly, focus on the school costs. If your firm will do it, and many big ones do, ask for them to provide a "scholarship" for each of your children - which is effectively a cost to them but doesn't fall to you as taxable income.

If your company is not supporting you; then life and the decisions will most likely be more difficult. I usually tell married working spouses to leave their families in their home country for the first 6-12 months, so that they can get their feet firmly on the ground and consolidate their career opportunities.

I address how to live a "middle-path" lifestyle in the next article.