In the country of sushi, the unthinkable has arrived. Rice, pillar of Japanese cuisine, is missing. The cereal price jumped approximately 70 % over a year in January, pushed by this shortage that started last summer. An exceptional context that led the government to unlock its strategic reserves in February.
At the origin of this shaking, a bundle of factors. The fault, first, to a capricious weather, which disturbed the yield of the crops. Then the earthquake alert, last August, and the fear of a lack caused panic purchases and speculation. Finally, the number of tourists has exploded, increasing demand. More structural reasons also explain this crisis situation. The Japanese state fixes a strict framework for importing inexpensive rice. A “disastrous” choice, judge Marcel Thieliant, director for Asia-Pacific to Capital Economics. Moreover, the price gap has been significantly dug with other producing countries, such as Thailand.
Imported inflation
This example illustrates a new reality for a country long trapped in a deflationary spiral: the return of inflation. “Rice is one of the few sectors where Japan is almost self -sufficient, so we could have expected that it be spared by inflation, observes Célia Colin, an economist in RexeCode. Finally, the increase in its price inflates food inflation, which weighs for 26 % of the consumer price index.” At its highest level in two years, Japanese inflation reached 4 % in January. Unimaginable a few years ago.
With the exception of rice, the roots of Japanese inflation are actually to be sought outside the borders of the archipelago, in the outbreak of import costs. Tribute to almost 90 % of the outside world for its energy needs, Japan has undergone the upper price increase since the start of the war in Ukraine. More generally, imports of goods – especially food – have added to the disruption of supply chains after the pandemic. But it was above all the weakening of his currency that exacerbated these costs. In the space of three years, the yen has lost more than 20 % compared to the US dollar, weighing the bill for many products.
This lever, which was a choice – Japan has bet on the devaluation of its currency to stimulate its exports – seems less and less effective. “The sensitivity of exports to a lower yen has decreased. This is partly explained by the evolution of their structure, Japanese companies now having their factories in other countries. This production is therefore not affected by monetary variations”, points Takahide Kiuchi, an economist in the Nomura Research Institute and former member of the Board of Directors of the Bank of Japan.
A new reality
In this inflationary turn, the rise in prices and that of remuneration did not follow the same rate. If the negotiations last spring led to an average wages of wages of 5 % in nominal, they declined in real terms-that is to say excluding inflation-for the third consecutive year. “For the moment, the desired scenario of a consumption drawn up by wages takes time to set up. They have increased more slowly than prices, which weighs on demand,” regrets Motohiro Sato, professor of economics at Hitotsubashi University in Tokyo.
Households, who have thus seen their purchasing power crumble, gradually adjust to this new deal. “Japanese consumers come out of twenty years of trauma, during which they have been used to saving and postponing their purchases while waiting for prices to drop. Getting out of this logic is not as quickly as the Central Bank would like,” notes Jean-François Chambon, Japanese Senior Japanese fund manager at OFI Invest Management.
Companies, too, adapt. “During the so-called” lost “decades, they had to master their costs and did not increase remuneration, recalls Jean-François Chambon. In addition, SMEs do not have the means to absorb this additional cost in the immediate future, they await a runoff on the part of the large groups which are supplied with them.”
The Boj dilemma
In this context, the Bank of Japan (BOJ) engages in a balancingist number. It was its very (too much?) Monetary policy that led to the current situation. But she plays a setback. When the American Federal Reserve, the European Central Bank and other institutions raised their rates to deal with rampant inflation, it timed, hoping to go out – finally – from the deflationary trap. Today, while its counterparts have started a softening, the Boj could still tighten the screw.
The difficulty: extend the output of the deflation without braking demand – and therefore growth – by an increase in too fast rate. Especially since Donald Trump’s return to the White House adds uncertainty. “American trade policy threatens to influence exports while exacerbating Yen’s weakness,” said Michael Wolf, economist in Deloitte in the United States, in a note. In Tokyo, some are concerned that the customs duties imposed by Donald Trump cause a resumption of inflation in the United States, which would push the Fed not to continue its drop in rate. A maneuver able to further accentuate the force of the greenback against the yen, pushing Japan to a monetary hardening. According to projections by Marcel Thieliant, Japanese rates could be around 2 % in 2030, against 0.5 % today.
Inflation, and after?
However, the painting is not so dark. Despite the questions it raises in the short term, the price increase is actually welcomed as good news in Japan. It is synonymous with recovery. Last November, the governor of Boj, Kazuo Ueda, also greeted “a moderate recovery in the economy”. In parallel, inflation nourishes the hope of a recovery of public finances – a fragility of the country – because it makes the national debt ratio retreat, which currently exceeds 240 %, by increasing nominal GDP. For its part, the IMF expects growth of growth in 2025, expecting a strengthening of private consumption.
Some encouraging signs are already felt: household demand has straightened in December, increasing by 2.7 % over the year. Japan can also count on the spending of foreign visitors: the drop in Yen is delighted by tourists, increasingly numerous – almost 37 million in 2024. A figure that the government wishes to bring to 60 million by 2030.
Inflation, of course, has accelerated. But there is little risk that it becomes uncontrollable. “There are several long-term factors-such as demographic decline-which draw prices downwards, so that we do not worry about the price of the price-forest loop,” explains Célia Colin. Especially since the prices of rice should deflate: thanks to the volumes of the strategic reserve, consumers who could turn to alternative cereals and a possible increase in imports, the Economics capital experts predict a decrease of 30 % by the beginning of next year, enough to reduce overall inflation by 0.6 point. Tokyo may have finally found the right recipe.
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