Korea's Purchasing Power Approaches Japan's

The base fare of a Tokyo cab is 710 yen or some W10,000, more than four times higher than the base rate in Korea, which is W2,400 (US$1=W1,114). And a haircut costs 3,000-4,000 yen in Tokyo, or over W40,000, more than four times the price in Korea.

The data show that the gap in per-capita gross national income between Korea and Japan based on actual purchasing power considering these price differences has narrowed significantly.

According to the Bank of Korea on Wednesday, Korea's per-capita GDP in 2010 was around US$20,500, but its per-capital GDP based on the purchasing power parity was estimated at $30,286.

The PPP is the currency conversion rate that eliminates the differences in price levels between countries. The reason why Korea's PPP-based GDP is larger than its actual per-capita GDP is because public utility fees and other consumer prices are cheaper than in advanced countries.

The gap with Japan is narrowing. Japan's PPP-based per-capita GDP in 2010 was $33,828, around $3,500 higher than Korea and ranking 20th in the world, one notch ahead of Korea. Luxembourg ranks first with some $80,000 and the U.S. fourth with $47,000.

But without considering consumer prices, Japan's per-capita GDP is $42,325, according to an IMF estimate, more than twice Korea's.   

Meanwhile, the central bank said Korea's economy grew 6.1 percent in 2010 on the back of rises in both exports and domestic consumption. It grew just 0.2 percent in 2009, just after the global economic crisis, but appears to have recovered.

Growth this year is expected to be lower than last year's. The BOK has projected 4.5 percent, while the state-run Korea Development Institute sees 4.2 percent. The Samsung Economic Research Institute forecast a 3.8 percent growth, and the Hyundai Economic Research Institute 4.3 percent. The government aims at 5 percent.