Inbizzy, Tokyo, Japan – Japan is facing mounting pressure from persistent food inflation as official data show both rising consumer prices and a record proportion of household spending devoted to food across major cities.
Japan’s nationwide core consumer price index (CPI), excluding volatile fresh food, rose 3.1% year-on-year in July 2025. Although the pace slowed from June’s 3.3% increase due to lower energy costs, inflation has remained above the Bank of Japan’s (BOJ) 2% target for over three years, since April 2022.
The so-called “core-core CPI,” which strips out both energy and fresh food to better reflect underlying price trends, climbed 3.4% in July. Food prices excluding fresh items surged 8.3%, driven by staples such as rice, chocolate, and chicken.
However, the pace of rice price increases—one of the main inflation drivers—began to ease, with a 90.7% rise in July compared to a 100.2% surge in June. Energy prices, on the other hand, fell 0.3%, marking the first year-on-year drop since March 2024 as lower fuel costs reduced household electricity bills.
“I believe prices have already peaked,” said Takeshi Minami, chief economist at Norinchukin Research Institute, citing the slowing rise in rice prices and upcoming government subsidies for electricity and gas bills. Minami also noted the BOJ could resume interest rate hikes as early as October if inflationary pressures ease further and economic growth remains strong.
Engel Coefficient Hits Record Levels in 80% of Major Cities
A separate analysis by Kyodo News highlights the growing burden on Japanese households. Using the Engel coefficient—a measure of how much of a household’s budget is spent on food—the study found record highs in nearly 80% of major Japanese cities between 2020 and 2024.
Osaka recorded the highest Engel coefficient at 31.2%, followed by Aomori at 29.6% and Kobe at 29.2%. The national average climbed to 27.5% in the latest five-year period, up from 25.6% in 2015–2019, reflecting both reduced recreational spending during the COVID-19 pandemic and a sharp rise in food prices due to a weaker yen and higher material costs.
Named after German statistician Ernst Engel, the coefficient is widely used in Japan as an indicator of household affluence. A higher rate suggests less disposable income for non-food expenditures.
Analysts expect the figure to remain elevated as rice prices and other staple food costs show few signs of falling significantly in the short term, keeping household budgets under pressure.
