The renewed jump in rice prices in recent months probably reflects the depletion of inventories ahead of this year’s harvest. If rice output picks up as strongly as the government is anticipating, rice supply will exceed demand for the first time in years. However, inventories will remain tight by historical standards so a plunge in prices looks unlikely. The upshot is that the Bank of Japan’s view that falling rice prices will push inflation below 2% over the coming months is probably too pessimistic.
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