In Japan, 10 Minutes of Work = 1 Big Mac

The Taipei Times.com carried an article by The Guardian (Tokyo) that said Japanese workers need to spend only 10 minutes at work in order to afford a Big Mac. That's six minutes less than Londoners according to UBS. McDonald's Holdings' Japan (Jasdaq: 2702) website says a Big Mac sandwich currently costs 280 yen (US$2.42), putting UBS' data for the average Japanese hourly wage at 1,680 yen or $14.50. I'm not going to pullout the Big Mac Index but I do want to share two quotes from the article and suggest an investment play.

First, Richard Jerram of Macquarie Securities in Tokyo:

"Consumer confidence is firmly based. The corporate sector has put the problems of the last decade behind it and is now recruiting permanent employees for the first time in 10 years. With accelerated job growth and better wages, the profits are starting to trickle down to workers ... The problem wasn't that people were saving and not spending but that they didn't have the money to spend in the first place."

And last, Jesper Koll of Merrill Lynch in Tokyo:

"Japan has always been geared into the global economy, so it will always depend on global economic growth. But if you're asking if a slowdown in the US or China will pull Japan back into deflation, then the answer is no."

With Japan exiting deflation and consumer confidence and spending the highest they've been in a long while it seems to me the obvious investment play for American investors eying Japan is in luxury retail. A few stock ideas that come to mind include Coach (COH), Tiffany (TIF), and Estee Lauder (EL).

Two key points to consider are:

(1) Along with improving consumer spending and the overall growth in the economy there has been a boom in suburban shopping mall construction. If the above companies are aggressive in opening new stores or retail locations in these malls the payoff could be huge given the number of new potential customers they can reach outside of the metropolitan areas.

(2) At some point in the near future the yen should strengthen against the dollar as the Bank of Japan must continue to raise rates while the Fed will have stopped. That means the above mentioned companies' earnings in yen will be worth more if/when converted to dollars resulting in a foreign currency conversion profit.

Disclosure: I do not own any positions in the companies mentioned in this post. I recently sold my entire position in Coach but am considering re-establishing a position. I sold in order to lock-in profits from a trade I entered when Coach fell to a ridiculously low price in the low $25.00 range.