COLA falling for servicemembers in Japan
September 20, 2006
TOKYO — Servicemembers in Japan can blame inflation that doesn’t even affect them for shrunken paychecks starting in November.
Cost of living allowances will be lowered due to rising costs in the United States, even though prices have remained the same in Japan. The COLA rates are some of the lowest in a decade.
COLA is paid to compensate for higher costs of living overseas. As prices in the States go up and the prices in Japan remain the same, there is less difference to compensate for, so COLA goes down.
If inflation means less spending power for stateside servicemembers, it has to equal that overseas.
“It’s a fair system,” said Army Lt. Col. Loren Darmofal, the country allowance coordinator for Japan. “If the COLA didn’t go down we’d be getting more than what people in the States are getting. It’s lower but it’s fair.”
The U.S. economy has seen a consumer price index increase — in other words, inflation — over the past few years. At the same time, Japan’s consumer price index has remained the same.
The rate increase for 2005 over 2004 was 3.4 percent, the latest full-year government figure available. In August 2006 prices were 3.8 percent more than in August 2005.
Each year, the Pentagon measures consumer prices across the globe by examining the cost of 120 goods and services in each location. The prices are correlated, then COLA everywhere is adjusted annually.
The same thing happened this time last year, Darmofal said.
Exchange rates also can affect COLA. When the rate change is significant enough it triggers a COLA index change, which occurred this summer.
The new rates in Japan will drop between 2 and 6 points, depending on location, on October 16. The change will appear in Nov. 1 paychecks.
To make the burden more bearable, the rates will drop two points a month, so families won’t have a sudden shortfall, Darmofal said.
As a rule of thumb, he noted, for an E-6 with 10 years experience and three dependents, one point equals about $25. So in Okinawa and Iwakuni, where the index dropped the most (6 points), that E-6 would have $150 less in his Jan. 1 paycheck.
Darmofal said he knows no one likes to see less money, but the system is designed to be fair.
“The purpose of it is to equalize purchasing power,” Darmofal said. “The system is working as it’s designed.”
Effective Oct. 16:
Atsugi (including Kamiseya): -4 points (from 136 to 132).Camp Zama: -4 points (from 136 to 132).Iwakuni: -6 points (from 130 to 124).Kure/Eta Jima Island: -6 points (from 162 to 156).Misawa: -2 points (from 122 to 120).Osaka-Kobe (including Gifu, Hamamatsu, Hyakuri, Komaki, Kyoto, Nyutabaru and Sapporo): -4 points (from 170 to 166).Okinawa: -6 points (from 130 to 124).Sasebo: -4 points (from 140 to 136).Tokyo (including Kumamoto City and Sendai): -4 points (from 156 to 152).Yokosuka: -4 points (from 140 to 136).Yokota (including Kichijoji, other Chiba, other Kanagawa, other Saitama, other Tokyo, Camp Fuji): -4 points (from 126 to 122).Other Japan: -4 points (from 146 to 142).Note: As a rule of thumb, for an E-6 with 10 years’ experience and three dependents, one point equals about $25 a month. The reductions are implemented in 2-point increments per month beginning Oct. 16.
— Juliana Gittler