Rice Prices Plunge in Japan, Inflation Outlook Remains Uncertain

Japan's inflation puzzle is growing more complicated as rice prices plummeted by 38% from last year, according to Barclays. The National Federation of Agricultural Cooperative Associations in Niigata set its provisional payment for 2026-crop Koshihikari rice at 18,500 yen per 60 kilograms.

The sharp drop in rice prices could cool consumer inflation just as underlying price pressures remain firm. Tokyo inflation excluding fresh food rose to 1.8% in August from 1.7%, while inflation excluding fresh food and energy accelerated to 2.0% from 1.8%. Cheaper rice could also weigh on related products such as packaged rice, rice balls, and some restaurant meals.

However, imported inflation remains a counterweight, with Barclays expecting yen weakness and elevated crude prices to keep Japan's oil import costs high. U.S. crude import prices are likely to remain more than 50% higher year-on-year, while Middle Eastern crude prices will be near 40% higher.