But analysts and travellers say Tokyo is not really as expensive as its image, especially after seven years of falling prices and an influx of cheap imports from China.
While Japan's seven-year bout with deflation appears to be nearing an end, a rebound in prices is hardly visible and shoppers are still benefitting from the long slide. Consumer prices fell by an average of around 0.5 percent in each of the past five years.
By comparison, consumer prices in both the United States and Britain rose around 2.5 percent a year on average in the same period.
"London is outrageously expensive, definitely more than Tokyo," said Shinichi Takasaka, a forex manager at Mitsubishi UFJ Trust and Banking Corp who recently moved from Britain.
"Even fast food costs so much," he says, recalling his shock when dinner at a pizza chain came to $40 a head. "I can't believe that Tokyo could be rated the most expensive."
International price surveys such as one by Mercer Human Resource Consulting, which rates Tokyo and Osaka as the first and second most expensive cities in the world, are carried out with expatriates in mind.
Mercer's survey prices a basket of more than 200 goods and services considered necessary for a businessman abroad. That includes cleaning services, rent on furnished apartments and tuition for international schools -- all relative luxuries in Tokyo.
Analysts say if expatriates are willing to adjust to local standards, such as living in smaller apartments and taking public transport, they can live substantially more cheaply than such surveys suggest.
Stefan Worrall, an economist at Credit Suisse First Boston Securities, said pursuits like golf were particularly expensive, making it costly for expats to keep up their previous lifestyles.
"The Japanese who take the train to work and eat at regular noodle shops are not really paying that much by comparison," he said.
Visitors to Tokyo willing to explore beyond the hotel buffet may be surprised by an abundance of cheaper alternatives.
"It's easy to have a nice sit-down lunch for 1,000 yen ($8.50) in Tokyo, while in New York it's often more than that, especially after tax," said Kei Matsuoka, a former New York designer who now works for a record company in Tokyo.
A key symbol of Japan's seven-year deflation, fast-food chain Yoshinoya's 300-yen beef bowl, is due to make a comeback next year after the recent resumption of US beef imports, banned for two years on fears of mad cow disease.
Another symbol of Japan's falling consumer prices has been the popularity of 100-yen shops selling everything from mascara to wine openers. Most of the goods are made in China, which overtook the United States last year as Japan's largest trading partner.
The Economist's "Big Mac" index, a survey of global prices of the famous hamburger, finds Japan relatively cheap at $2.34, compared with $3.06 in the United States and $3.44 in Britain.
Japan's government does not compile any comprehensive price comparison surveys, although the Cabinet Office looks at public utilities and services prices.
Its survey shows gas, water and long-distance telecommunications in Japan cost nearly twice as much as in the United States or Britain, although subways and Internet connection costs are slightly cheaper.
The government has been privatising state-owned monopolies and deregulating various industries to stimulate economic activity, and cheaper gas and electricity have been contributing to deflation over the past few years.
CSFB's Worrall, who has lived in Tokyo since 1999, said foods and services were still overpriced, due in part to government protection.
"There remains significant protection from competition among most service industries," he said.
But even protected industries are slowly being exposed to market competition. While routes are still limited, discount carriers like Skymark Airlines are putting pressure on airline giants All Nippon Airways Co and Japan Airlines
While rice and other food prices are still relatively high due to heavy subsidies and high labour costs, imports from China are lowering the average cost of groceries overall.
Trade pacts with countries like the Mexico and the Philippines are also expected to make tropical fruits and vegetables more affordable in the years ahead. Avocados can already be found as cheap as 100 yen apiece -- less than in most supermarkets in New York or London.