A widening gap in global currency performance is dramatically altering the cost of living across major cities, according to a new Deutsche Bank study. Tel Aviv has emerged as the world’s most expensive city for a McDonald’s meal and one of the costliest places to live overall, while Tokyo, once synonymous with premium prices, has become one of the best-value destinations among developed economies.
The report highlights how exchange rates, domestic economic policy and supply constraints are reshaping purchasing power for both residents and international visitors. A stronger Israeli shekel has pushed prices higher when measured in U.S. dollars, while Japan’s prolonged period of ultra-loose monetary policy has weakened the yen, reducing costs for overseas consumers.
Tel Aviv’s stronger currency amplifies living costs
Deutsche Bank’s findings show how quickly Tel Aviv’s economic profile has changed over the past decade. Since 2012, net salaries have risen by 137% in dollar terms, apartment prices have climbed 136%, and the cost of dining out has increased by more than 120%.
One of the clearest illustrations is the price of a McDonald’s combo meal, which now averages $20.90, the highest among the 69 cities covered in the report. The city also ranks among the world’s most expensive locations for clothing, fuel and new vehicles.
Former Bank of Israel Deputy Governor Zvi Eckstein said high consumer prices cannot be explained solely by exchange rates. He noted that housing shortages, limited food supply and domestic policy have played a larger role in pushing everyday expenses higher.
The shekel has appreciated by around 30% against the U.S. dollar since 2012, including a further 13% gain over the past year despite regional conflict. Deutsche Bank attributes that resilience to Israel’s technology and defence sectors, together with supply disruptions that have supported domestic economic activity.
Eckstein also explained that Israeli investors shifted more of their long-term investments back into domestic assets after the country’s stock market significantly outperformed many international markets, adding further support to the currency.
Japan’s weak yen transforms Tokyo’s affordability
Tokyo presents almost the opposite picture.
After decades of being regarded as one of the world’s most expensive cities, Japan’s capital has become substantially more affordable for international visitors as the yen has steadily weakened.
Deutsche Bank estimates that Japan’s relative price level compared with the United States has fallen sharply over the past three decades. Since 2012 alone, the yen has lost more than half of its value against the dollar as the Bank of Japan maintained exceptionally accommodative monetary policy in an effort to combat persistent deflation.
That depreciation has lowered the cost of accommodation, dining and consumer goods for foreign travellers. A centrally located three-bedroom apartment now rents for roughly one-quarter of the equivalent property in New York, while restaurant prices remain significantly below those found in leading financial centres such as Zurich and New York.
The report also notes that Japan has become one of the least expensive countries in which to purchase a new iPhone, highlighting how currency movements can reshape international price comparisons.
For Japanese households, however, the picture is less favourable. Net salaries have declined by 18% in U.S. dollar terms since 2016, reducing international purchasing power despite relatively stable domestic prices.
Currency shifts are becoming a bigger driver of global competitiveness
The findings underline how exchange rates increasingly influence not only tourism but also business competitiveness, investment flows and corporate decision-making.
According to the World Travel & Tourism Council, international tourism continues to recover strongly following the pandemic, making currency valuation an increasingly important factor when travellers and multinational companies decide where to spend money or allocate capital. Cities benefiting from weaker currencies often become more attractive destinations, while stronger currencies can reduce export competitiveness and raise costs for international consumers.
At the same time, domestic structural issues remain equally important. Israel’s housing market continues to face supply limitations, while agricultural import protections contribute to higher food prices. In Japan, policymakers are balancing the benefits of a competitive currency against long-term concerns surrounding wage growth, demographic decline and labour shortages.
These broader economic conditions suggest that exchange rates alone rarely determine affordability. Government policy, productivity and housing supply continue to shape how residents experience rising or falling living costs.
What investors and travellers should watch
The Deutsche Bank report illustrates how quickly global rankings can change when currencies move sharply over several years.
If the shekel remains strong, Tel Aviv is likely to continue ranking among the world’s most expensive cities for international consumers unless housing and supply constraints ease. Conversely, Tokyo may remain attractive for overseas visitors while the yen stays weak, although any future tightening by the Bank of Japan could gradually reverse that advantage.
For businesses, investors and travellers alike, currency movements are becoming an increasingly important measure of where value, costs and opportunities are shifting across the global economy.
