Japan rice crisis shows signs of easing as prices stabilize and stocks return to shelves

• Prices of a five-kg bag of rice in supermarkets have dipped below 4,000 yen, the lowest in about two months.
• The shortage also seems to be easing, according to Japan's national supermarket association.
• However, rice prices in Japan still remained elevated, with a Tokyo resident saying rice prices had increased sharply.

After months of increasing rice prices, Japanese consumers may be finally getting some relief.

Data from Japan's agriculture ministry revealed that the average price of a five-kg bag of rice had fallen to 3,920 yen ($27.03) for the week ending June 15, which marked the first time that rice had fallen below the 4,000-yen mark since the week that ended on March 2.

This was also the first time that rice prices came within the target set by Prime Minister Shigeru Ishiba.

In May, Ishiba promised to lower prices, reportedly saying he believed that “rice prices should be in the 3,000-yen range, since staying in the 4,000-yen range can't be right.” Ishiba also reportedly told opposition lawmakers that he would take personal responsibility for the matter.

Rice has been a hot-button topic in Japan, with surging prices and shortages leading to empty shelves in supermarkets across the country.

Careless comments over rice had even cost a minister his job. Japan's former farm minister Taku Eto stepped down in May, following public outrage over his comments on getting free rice from supporters.

Rice prices in Japan rose sharply in the second half of 2024 — on the back of poor harvests in 2023 and an outsized demand from tourists — and accelerated further in the first half of this year.

Yoichi Ryu, a 26-year-old Tokyo resident, told CNBC on Friday that the spike in rice prices was stark.

He recounted that a five-kilo bag of ice cost about 1,800 yen to 2,000 yen two years ago, but prices have more than doubled to between 4,500 and 5,000 yen.

“The increase was very drastic this year, maybe from March to April. So just a couple months ago, they have been increasing every single day, maybe a couple hundred yen, every single day,” he added.

Government data revealed that rice prices had more than doubled in May, skyrocketing by 101.7% and marking the largest increase in over half a century.

Shortage easing, but unevenly

However, it seems that there is some light at the end of the tunnel for Japan's rice shortage. Besides the release of government rice reserves, retailers have been offering rice imported from overseas, such as the U.S. and South Korea.

Supermarket Aeon started selling California-sourced rice on June 6, saying that the decision was made amid low domestic rice supplies in Japan.

In April, Japan imported rice from South Korea for the first time since 1999, Bloomberg said. South Korean food export company The O Global was also reported to have signed an agreement in May to export 200 tons of South Korean rice to help ease Japan's supply shortage.

The contract represents the largest volume of rice ever exported by a private South Korean company for general consumer sales in Japan, the Korea Times reported.

In response to queries from CNBC, Japan's National Supermarket Association said that the shortage in Japan appears to be easing “thanks to the release of government rice stockpiles.”

But supply recovery has been uneven, with rice shortage persisting in some places. Roy Larke, professor of Japan business at Tokyo-based intelligence firm JapanConsulting.com, told CNBC that some supermarkets around Tokyo still have empty rice displays, but these are small stores.

He added that “some chains don't seem to be having a problem and that some regional stores do have rice.”

Yoichi said, “I remember recently, I've gone to [the] supermarket to buy rice to restock, but I couldn't buy them because they just weren't there, but their price tags were still present.”

Prices remain high amid quality concerns

Despite rice making a comeback, prices still remain high. The National Supermarket Association said that there is “no stock of reasonably-priced rice.” Many stores seem to have unsold high-priced rice, it added.

Larke highlighted there may be other reasons for this, noting that “a month on from the government releasing stockpiles, prices of branded rice have only just begun to dip and, it currently seems, only slightly so far.”

When Japan's government released its emergency stockpiles, it had sold rice directly to retailers, aiming to get these stocks to consumers at 2,000 yen per sack.

“The fact that wholesale, branded rice prices took a month to begin to decline and are still above the government's target [of 2,000 yen per 5kg bag] suggests that it may be more than just a supply and demand issue,” Larke said.

Many consumers are concerned that the stockpiled rice is old and not as tasty, he added.

Yoichi echoed the same sentiment, saying that the government's grain stock is of poorer quality compared to newly harvested stocks of rice.

In Japan, newly harvested rice is marketed as “shinmai”, literally new rice, and is perceived to taste better. There is even a legal requirement that only rice packaged by December 31 of that year is allowed to be labelled as “shinmai.”

After the next year's harvest, the current crop will be known as “komai,” or old rice. The government reserves come from older crops, and terms like “ko-ko-komai” (literally, old-old-old rice) are being used to describe the 2021 crop.

Statements from Japan's central bank officials indicated that while they are keeping an eye on rice prices, such sharp increases are likely to ease going forward.

BOJ governor Kazuo Ueda said in a press conference after the central bank's June meeting that “when we look at recent data, consumer inflation is moving around 3%. But this is mostly due to rising import costs and rice prices ... we expect such pressures to dissipate,” according to comments translated by Reuters.