Spain overtakes Japan in nominal per capita income

Spain surpasses Japan's per capita income for the first time

The examples cited in the debate are striking: a paperback costs three euros in Japan and ten in Spain; eating out is six euros at Japanese exchange rates versus twelve here. Based on these price references, the IMF projects that Spain's nominal per capita income will end the year ahead of Japan's: $34,932 compared to $34,554. This has never peine since data collection began.

Spain remains one of the weaker members of the eurozone and has lost relative ground globally compared to previous eras. The overtaking comes with a caveat, and that caveat is the yen.

The yen-enabled overtaking

Japan has endured three decades of flat growth, near-zero interest rates, and a currency that has declined alongside them. When a currency plunges, everything a country produces translates into dollars at a discount, including its per capita income. Consequently, the Japanese figure falls even though the real economy hasn't deteriorated proportionally. In 1995, Japan had $45,000 per head and was second in the world, behind only Switzerland. Today, its dollar-denominated income trails Spain's.

Japanese stagnation is a domestic issue. It also serves as the mirror in which Spain looks good.

Is Spain really richer than Japan?

No. In terms of purchasing power parity (PPP), the adjustment that removes price differences between countries, the gap narrows but does not reverse: $52,000 per inhabitant in Spain versus $56,000 in Japan. Japan still leads.

Prices are the battlefield. Some argue that Japanese purchasing power doubles that of Spain, while others nuance this, noting that adjusted figures show both countries are very close. Examples abound: the paperback worth three euros there, cheaper olive oil in Tokyo, lunch menus for six euros. The average Japanese salary hovers around $40,000, higher than Spain's, and earners spend it in a country where the basic basket weighs less.

Houses depreciating like cars

On the outskirts of Osaka, homes are listed for €180,000. The Japanese real estate market has a peculiarity hard to digest from Europe: houses lose value from the day of purchase, and after paying off a forty-year mortgage, they are worth almost nothing. Behind this lies a robust construction and renovation industry, flexible land-use policies, and the habit of demolishing and rebuilding every few decades.

In Spain, the opposite occurs. Some summarize the situation with a painful phrase: Polish or Lithuanian wages with Norwegian housing prices.

The other side of the scale: demographics and debt

Japan loses nearly one million inhabitants a year, has one of the oldest populations on the planet—mortality doubles birth rates—and carries public debt around 250% of GDP. Given this picture, overtaking it in nominal per capita income is less impressive.

But consider the rest of the scoreboard. Unemployment is negligible. Its industrial fabric remains far superior to Spain's. It is the third-largest economy in the world, and its nominal GDP has exceeded six trillion dollars, a threshold Germany has never reached. No one gave it anything for free.

What GDP doesn't count

According to this analysis, Spanish tourism generates revenues comparable to what Amazon, Microsoft, Facebook, and Google would contribute if they were listed on the IBEX. Spain boasts notable infrastructure. And some curious details: it is one of the noisiest countries in the world, second only to Japan, and Spanish is one of the fastest-spoken languages, surpassed by very few, including Japanese.

In Spain, as noted in the debate, GDP accounting includes activities such as prostitution. Hence the uncomfortable question hovering over the figure: what would happen to the calculation if that activity were banned without altering the statistics?

Comparing with Japan bothers both sides

Spain boasting about overtaking Japan has equal numbers of defenders and detractors. Part of the analysis considers it conjunctural: a currency effect that vanishes once the yen and Japanese interest rates move. Another part argues the data hides a real underlying strength, showing that a country with fewer people and similar economies of scale has held up better than the Japanese giant. A third, more uncomfortable view reminds us that comparing oneself to Japan or Italy is already for losers, whether you win or lose.

To judge incomes, one must choose the right mirror. Compared to Switzerland, Norway, Ireland, or the United States, the Spanish picture looks different. Japan had $45,000 per head in 1995; current projections leave it at $34,554. That, not the overtaking, is the disorienting data point.