Far East: Record Food Price Surge Hits Japan With Five-Fold Increase Over Last Year

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From the imminent tariffs to worsening geopolitical issues, Japan cannot seem to catch a break with a new crisis on the horizon: food inflation. Throughout Japan, major food producers from Ajinomoto to Lotte have announced that they will increase the price of their products; altogether, over 2,105 products will face an immense increase in price, up to 5 times the price from July last year. Combined with a rice shortage nationwide that has rocked Japan since May, population centers like Tokyo and Osaka will see heightened food inflation as demand surges in the scorching heat, as forecast for East Asia in the coming weeks.

While the Bank of Japan has signaled another potential rate hike to ease the situation, and the government has begun rolling out rice production initiatives, little is known about how grave and dire the situation in Japan truly is.

‘I never had to buy rice’

This statement was made by Japan’s former agriculture minister, Taku Edo, who was later dismissed by Prime Minister Ishiba as public anger and scrutiny over sky-high rice prices intensified, with the remark seen as striking the wrong tone. The food price situation got so bad that the Japanese public, globally known to be patient and polite, began to voice their anger aggressively.

Japan has been hit with record-breaking food prices starting with rice from May, as the heatwave makes its way from the Korean peninsula to the Japanese archipelago, affecting rice production throughout East Asia as crop yield reduces from the immense heat. Most of the Japanese public have since switched to eating other kinds of flour-based food, such as bread and noodles, whose prices have remained relatively stable for years. Unbeknownst to them, however, the rice price hike was just the beginning.

As it turns out, the lack of rice signifies the lack of other raw materials as well. Japan has been faced with the ever-increasing cost of energy and raw materials for years, and there has been no clear government intervention to lower such costs. Labor cost was also an issue, as the rising trend has been observed since 2023 and again, no proper government intervention was introduced. This price hike, therefore, has been a ticking time bomb in Japan, and as July 2025 comes by, the time is running out as the country must now make a tough choice to ease the burden on its citizens.

Price Increased For 2,105 Items

Everything from sauces to coffee and chocolates will see a substantial price increase, starting from July onwards. Major food manufacturers such as the confectionery maker, Lotte Co., have mentioned that its 128 items will be subject to a 47% increase in price. According to a report, the price hikes are the direct result of rising raw material costs, logistics costs, and energy costs. The report also mentions that the heatwaves have affected the supply chain, not only within Japan but throughout the entire East Asian region, including South Korea and China, where Japan outsourced many of its supply chain. In a final blow, the report concluded that with the weak yen, importing costs are higher, so Japan is now running on a supply chain dead end.

This affects the domestic social climate negatively, with news articles asking the question: “Do governments and companies understand the demands and requests of consumers?” Citing the need for lower taxation as the tax and social security burden prevents the consumer from having a stronger demand within the economy.

So far, the government of Japan has introduced new policy guidelines, rolling back decades worth of crop restrictions in hopes that the domestic crop production, rice in particular, will be given a boost, potentially to the point that a healthy export market can be created. That, however, may be achieved from the 2027 harvest onwards, and it is still a long way there. In the meantime, the government is selling out stockpiles of rice in an effort to stabilize prices. Regardless, no potential reduction in tax was mentioned; therefore, the core issues were still not fully tackled and addressed.

To Hike or Not To Hike?

In an effort to mitigate the imminent inflation on the horizon, the Bank of Japan is considering another rate hike. This is a tumultuous decision in the making as inflation in Japan remains above its 2% target and the weak yen poses a threat to trade. If the BOJ decides to do so, the consequences are either an incredible success or a disastrous crisis, not in between. Hiking the rate means that it could strengthen the yen, improving the import conditions and eventually the supply chain. On the other hand, the rate hike could send the tariff-battling economy to go into overdrive. With stagnant demand and negative real wages, the BOJ has a tough decision to consider.

Not to mention that this rate hike would send shock waves globally, as this will be the third rate hike in the span of one year. Japan has a long-standing tradition of possessing a negative interest rate since 2007, but that tradition was brought to an end last July in an effort to combat the weak yen. Until now, the yen is still weak. With the food inflation and tariff war knocking at the door, the BOJ will need to be aware of how and when to do a rate hike that yields the best possible outcome for everyone, a task that almost seems impossible in the current dire situation Japan is in.