According to official data released Friday, rice prices in Japan increased 90.7% year over year in July. However, the rate of increase moderated from prior months, providing some respite for Prime Minister Shigeru Ishiba.
Due to voters abandoning his long-dominant Liberal Democratic Party over price increases, Ishiba’s coalition lost its majority in both chambers in this year’s elections, casting doubt on his future.
Among other reasons, panic buying following a “megaquake” warning last year and supply issues related to a scorching summer in 2023 have caused rice prices to soar in recent months.
Overall, Japan’s core inflation eased to 3.1 percent from 3.3 percent in June.
But it remains above the Bank of Japan’s two-percent target, cementing expectations that it will hike interest rates this year.
Excluding the cost of fresh food, the result was marginally higher than the 3.0 percent market forecast.
Consumer prices increased 3.4 percent, the same as in June, when energy was taken out of the equation.
Despite its reluctance to further tighten monetary policy, the BoJ last raised interest rates in January.
It believes that short-term factors, such as the price of rice, are to blame for above-target inflation.
By claiming that the BoJ was “behind the curve” on inflation, US Treasury Secretary Scott Bessent increased pressure on the central bank to raise this month.
“Although inflation is likely to cool a bit further in the months ahead, it shouldn’t prevent the Bank of Japan from resuming its tightening cycle in October,” Abhijit Surya at Capital Economics said Friday.
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