Ed, unless Sriram edited his post, I can't see anywhere where he said that Leica was more expensive than Japanese glass.
Now I've just popped over to B&H, and had a look at the R-lenses (SLR with SLR to add a bit of similarity to the comparison rather than M-lenses).
At US$895, the Summicron 50mm f2 is the cheapest lens around.
The 1.4 model kicks in at the very competitive price of US$1995.
Or take the 180/2.8 which kicks in at US$3295.
A Nikon 50mm f1.8 lens will set you back all of US$119. About 7-8 times cheaper.
The 1.4 model kicks it at US$289, almost the same again.
You can even get a 1.2 model for US$549 if you can afford it.
The 180/2.8 comes in at US$729. There was a second hand piece of Leitz glass that was going for three times this amount on the B&H website.
The F5 costs US$1929 (official, not import) while an R8 costs US$1750. An M6 kicks in at US$1950. I'll not deny you could probably get the same for US$1500 as you say, but I'm lifting the prices off the same website so they should be comparable.
I have also just done a comparison for Nikon stuff for convenience, anyone who takes the Canon prices into comparison will find they are much closer to the Nikon set than the Leica set.
As you kindly point out, an F5 will blow the lights out of an M6 or an R8 technology wise. And as far as I'm concerned, it's equally well made. So why the difference in price (in the sense that you're paying the same to receive a lot less)? With glass, I might buy all that stuff about rare earth and such. But I think it's an undeniable fact that the F5 does a lot more than the R8, and is built at least as well. Take for instance, manual film advance versus 8fps (there is an optional winder or motor drive but that costs extra and doesn't reach 8fps), autofocus that keeps up with 8fps and even 6 years down the road is still top of the line versus manual focus...
It is clear there is a premium on the R8 compared to the F5. People are paying for the Leica name, and maybe because it's hand crafted or whatever. But does that really make a difference other than for collecting? Maybe the same premium in the cameras translates to the lenses. So maybe all you're really getting are similar lenses that cost more because of the name and/or the fact that they are hand made.
Manpower costs money especially considering they are made in europe or canada.
As above, why should it make a difference whether something is put together by hand or not? For the camera user that is, and not the camera collector? In fact in this day and age of high precision machining, I'd probably prefer to have something that's machine manufactured.
They build their cameras to last a "lifetime". Some LEICA R BODIES are built so solid I saw a photo of a man standing on the camera, just to demonstrate its durability, would you dare do that to a composite bodied japanese SLR?
Yeah well, so do Nikon and Canon et al with their professional cameras. Don't take a S$800 polycarbonate Japanese SLR to compare it to a US$1800 approx camera.
For the price you have to pay for the LEICA and CONTAX's, their LENSES better damn perform well!, and indeed most generally do.
They have very HIGH-RESOLVING power, thus enabling you to enlarge your pictures way past 16x20 inches and still get brilliant wonderful prints.
Really? About 7 to 8 times as well? Or just maybe 10% more? Or is there actually any difference at all? Do you know this for a fact, or is there an implicit notion in society today that if you pay top billing for something it is necessarily better. I'm not saying you've fallen into the trap, I'm asking.
Another difference is, not until lately have the major japanese lens makers considered "BOKEH" into the design of their lenses.
Not until lately. But by that I suppose you mean that they have now? In which case, why have the prices of the lenses also not gone up tremendously with the Japanese manufacturers claiming that their lenses now feature much better bokeh? It  doesn't cost that much more to manufacture  doesn't make that much of a difference and  people won't pay exorbitant amounts to get better bokeh.
Pick up a LEICA M lens the next time you have a chance, and look at the number of aperture blades they use on the lens, notice how they design it such that at most apertures the opening is nearly circular, thus giving near perfect rounded OUT-OF-FOCUS effects and pleasant natural looking bokeh.
Actually, the jury is still out on what influences bokeh. The aperture blades are only the tip of the iceberg, and only affect the out of focus highlights of an image. There is a lot more in lens design that affects true bokeh, not just the out of focus highlights.
Minolta and Canon were ahead of Nikon in recognising the signifance of Bokeh. One can only tell this difference when you compare pictures taken from different lenses.
Oh really? You can get differences even between different Nikon lenses, so how you manage to draw the distinction between the three manufacturers I have no idea.
I have taken pictures with the CONTAX T2 with a 38mm sonnar zeiss lens, and I can tell you there is a dicernable difference in the quality of the pictures.
Okay. But I challenge anyone to tell me under controlled circumstances which pictures were taken with Zeiss, Schneider, Nikon, Canon or Minolta glass. Whether on the light table or with 8x10 prints. The thing is these days, film tends to be more of a limiting factor than lens design.
But for now, the differences are subtle, more "poetic", something which , like wine-tasting, only the few can discern.
That's a good argument, I like it - seriously there's no sarcasm here. It's the, if I can't see it then I must be an uncultured barbarian. Very nice. Without meaning to degenerate this thread even further, I suppose this is like that now-infamous-on-clubsnap sheet of blue canvas. The art there is subtle, poetic and only a few can discern. Well, I for one couldn't see that and wouldn't pay £6500 for it, and frankly, I'm happy I can't discern. But as I said, I do like your argument, very cunning. I agree and I lose the argument, I disagree and I'm an uncultured barbarian...
And before anyone considers it, we are not here to discuss blue pieces of canvas so no more replies on that point anyway please.