Rice prices in Japan have surged dramatically, more than doubling in May with an increase of 101.7% year-over-year, the most significant rise in over fifty years. This alarming trend follows a 98.4% spike in April and a 92.1% rise in March. As farmers prepare to harvest new crops, bags of rice are anticipated to return to supermarket shelves soon; however, the increased supply is unlikely to ease the escalating prices of this staple food.
In response to the soaring cost of rice, which has captured national attention, the Japanese government has started releasing emergency stockpiles. Meanwhile, Japan’s core inflation has also been on the rise, reaching 3.7% in May, the highest level since January 2023, surpassing economists’ expectations of 3.6% as reported by Reuters. This figure, which excludes fresh food prices, marked an increase from April’s 3.5%. Headline inflation, which encompasses all consumer prices, is slightly lower at 3.5%, down from April’s 3.6%, indicating that inflation has now exceeded the Bank of Japan’s (BOJ) 2% target for 38 successive months.
The so-called “core-core” inflation rate-stripping out both fresh food and energy-rose to 3.3% from 3% the previous month. Kei Okamura, portfolio manager at Neuberger Berman, described the inflation figures as unsurprising amid the rise in food prices. He noted in a CNBC interview, “We are of the view, though, that over the next several months, we should see a waning of these price pressures from foodstuffs.” Okamura also highlighted that increasing geopolitical tensions in the Middle East could further exert pressure on energy prices.
As inflation escalates, the BOJ has maintained interest rates at 0.5%, following a policy meeting earlier this week. In its statement, the BOJ acknowledged ongoing wage increases being passed on to selling prices. Governor Kazuo Ueda was quoted in a recent parliamentary session, expressing that the central bank will consider raising rates again “once we have more conviction that underlying inflation will approach 2% or hover around that level.” Despite the current inflationary pressures, the BOJ projects that inflation will begin to decline, attributing this expectation to a deceleration in economic activity.
Adding to these concerns, Japan’s economy contracted by 0.2% in the first quarter of 2024 compared to the previous period, marking the first quarterly shrinkage in a year, largely driven by a decline in exports.
As Japan grapples with these economic challenges, the combination of rising rice prices, escalating inflation, and a sluggish GDP underscore an urgent need for policy responses to stabilize the country’s economic landscape moving forward.
Categories: Japan, Economic News, Inflation
Tags: Rice Prices, Inflation, BOJ, Economic Growth, Japan Economy
Original Source: https://www.cnbc.com/2025/06/20/japans-core-inflation-hits-highest-level-since-jan-2023-putting-pressure-on-boj-to-raise-rates.html
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Publish Date: 2025-06-20 06:35:00
