I actually live in Taito-ku, only a couple stations from Ueno. And I'm inside the Yamanote loop. I'm not downtown, per se, but c'mon... The real point is: it's expensive but it's not THAT expensive. If you're smart, you can budget, and -- well -- if you're smart, you can even live in Tokyo on a below average income (average is 250,000JPY/month, I think).

As for taxes in Japan, there is a 5% consumption tax on all goods and services. Yay for sales tax! Considering New York* has an 8% state sales tax, it's not so bad, though. However, right now I'm paying a reasonable 3.3% income tax. Convert my approximate yearly salary to USD's and I'd likely be in the 28% range in the States.

-Eric

*I know other states are lower -- CT 6%, NH 0%, for example -- but Tokyo is often compared to NYC and I just happened to have lived in NY and know the sales tax. Deal with it.