Japan Rice Prices Rise 91% July Inflation Spurs BoJ Rate Hike Expectations

Rice prices in Japan surged 90.7 percent year-on-year in July, though the rate of increase has slowed from previous months, offering some relief to Prime Minister Shigeru Ishiba amid voter anger over inflation. Japan's core inflation rate eased slightly to 3.1 percent in July but remains above the Bank of Japan's two-percent target, reinforcing expectations of an interest rate hike in October. The inflation persistence is driven by factors including a hot summer in 2023, panic buying following a megaquake warning, alleged hoarding, and increased demand from tourists. Ishiba's ruling coalition has lost its majority in both chambers, partly due to inflation concerns, prompting his government to appoint a new farm minister and release emergency rice stocks to curb prices. Despite the Bank of Japan's hesitance to tighten monetary policy, US Treasury Secretary Scott Bessent has criticized the central bank for lagging on inflation, increasing external pressure for a rate hike. The government also reversed decades-old policies encouraging farmers to grow crops other than rice and is considering increased rice imports from the United States, as urged by US President Donald Trump.