Japan’s Rice Prices Surge Over 100% in May — Largest Increase in Over 50 Years

In May 2025, rice prices in Japan jumped 101.7% year-over-year, the sharpest increase in more than half a century. This dramatic spike follows a 98.4% rise in April and a 92.1% increase in March, underscoring a sustained upward trend in food costs.

To address the soaring prices, the Japanese government has started releasing emergency rice stockpiles in an effort to stabilize the market for this essential staple.

Core Inflation Climbs to 3.7% — Highest Since January 2023

The surging cost of rice has significantly impacted Japan’s core inflation, which rose to 3.7% in May, exceeding economists’ expectations of 3.6%. This also marks a rise from April’s 3.5%, and the highest level since January 2023.

Meanwhile, headline inflation came in at 3.5%, slightly down from 3.6% in April. Despite the dip, this marks 38 consecutive months above the Bank of Japan’s (BOJ) 2% inflation target.

Rice Accounts for Half of Core Inflation, Experts Say

According to Marcella Chow, Global Market Strategist at JP Morgan Asset Management, rice alone makes up nearly 50% of Japan’s core inflation. She emphasized that Japan’s future inflation trend will largely depend on food prices — particularly rice.

Chow also pointed out that government efforts to lower rice prices could boost household consumption, especially if the reductions affect processed foods and restaurant pricing.

BOJ Holds Rates, But Eyes Further Hikes if Inflation Persists

The BOJ kept its key interest rate at 0.5% following its latest policy meeting. Governor Kazuo Ueda told parliament that rate hikes would continue only when the bank is confident that underlying inflation will approach or stabilize near 2%.

Still, the central bank noted that "underlying CPI inflation is likely to be sluggish," primarily due to slowing economic growth.

Japan’s Economy Contracts for the First Time in a Year

In addition to inflation concerns, Japan’s economy contracted by 0.2% in Q1 2025, marking the first quarter-on-quarter decline in a year. A drop in exports was a major contributing factor.

Kei Okamura, portfolio manager at Neuberger Berman, noted that while the recent inflation data is not surprising, food-related price pressures are likely to ease in the coming months. However, he warned that rising geopolitical risks — particularly in the Middle East — could still drive up energy prices, adding further uncertainty to Japan’s inflation outlook.

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