Every year Tokyo is ranked as one of the most expensive cities to dwell in the world. When the new list comes out each year, it makes a big media splash and leaves a few cities etched in our memories and fades away again until next year. But if you look at how the ratings are put together, you’ll see that it’s not a great indicator of actual costs of living in a foreign city.

The rankings that you typically see are guides for companies who will be employing expats abroad. The Mercer’s Cost of Living survey is promoted as a guide for creating compensation packages for expats. Typically, the estimates gauge how the average American lives and finds approximately the same items in the foreign country. Some items that can drive the cost of living up are the cost of American staples like bread. Bread in Japan is expensive compared to America, but that’s because it’s not a staple food. Most Japanese eat rice.. (although rice is more expensive than in America as well..) The bottom line is if you live abroad you aren’t going to live exactly like you did in America. If you live like the locals and adjust your lifestyle then you can realize much lower costs than the Mercer survey.

Living in Tokyo is actually cheaper for me than living in my hometown of Phoenix, Arizona. My major cost savings are in transportation and health insurance. See below for a few examples.

For the sake of an example, just approximate $1 = 100, tips in America run 15% to 20%
(oh, and these are my own estimates – nothing scientific just observations)