Halving of Import Tariffs on Edible Oils Shakes the World: A Thorough Analysis of FMCG Companies' Profit Margin Improvement and Its Impact on Japanese Households

2025年06月07日 18:45

Background: Unstoppable Edible Oil Inflation
Details of India's Tariff Reduction
Impact on FMCG Companies' Profits
How Will Local Consumer Prices Change?
Current Situation and Challenges in the Japanese Market
Mechanism of Ripple Effects to Japan
Household Simulation: What if Tariffs are Reduced by 10%?
Response Strategies of Small and Medium Food Manufacturers
Supply Chain and Geopolitical Risks
Eco-Sustainability Perspective
Voices on SNS: Expectations and Concerns
Future Outlook and Policy Recommendations
Conclusion

1. Background: Unstoppable Edible Oil Inflation

The sunflower oil shortage due to the Ukraine situation, the surge in olive oil prices caused by droughts in Spain, and the rise in logistics costs due to high crude oil prices—over the past three years, global edible oil prices have risen by an average of 40%. Since edible oils are incorporated into a wide range of categories such as fried foods, processed foods, and snacks, fluctuations in raw material costs are immediately reflected in retail prices.

2. Details of India's Tariff Reduction

On May 31, 2025, the Indian government fixed the basic import duty on crude palm oil, crude soybean oil, and crude sunflower oil at 10% for one year and expanded the difference with refined oil to 19.25%. The Ministry of Finance estimates that this will have the effect of lowering the "edible oils and fats" item in the domestic Consumer Price Index (CPI) by 0.2 to 0.3 points.

3. Impact on FMCG Companies' Profits

According to estimates by NDTV Profit and Fortune India, the operating profit margins of snack giant Bikaji Foods and Nestlé India are expected to improve by 0.8 to 1.2 points, with stock prices rising by an average of 3.5% in the week following the announcement.

4. How Will Local Consumer Prices Change?

According to the retail industry group CAIT, store prices are expected to drop by 5-6% within two weeks, with effects also spreading to domestically produced oils such as mustard oil. However, due to exchange rate fluctuations and inventory adjustment time lags, an immediate comprehensive price reduction is not expected.

5. Current Situation and Challenges in the Japanese Market

In April 2025, Nisshin OilliO raised the prices of household oils by 7-11% and commercial oils by 11-19% in Japan.

Factors are

Decline in Canadian Canola Oil Content
Surge in Electricity and Logistics Costs
Yen Depreciation (from 125 yen to 152 yen per dollar)

Domestic tariffs are effectively low at 2.5-3.5% under TPP and EPA frameworks, but raw material costs and exchange rate factors negate this.

6. Mechanism Affecting Japan

Effect of International Price Decline: With tariff reductions, supply and demand across Asia are expected to ease, leading to a projected drop in CIF prices by about $45 per ton.
Diversification of Procurement Sources: Japanese trading companies could potentially reduce procurement costs by 1-2% by utilizing transshipment via India.
Currency Barrier: If the yen continues to weaken, there is a risk that the actual price will remain stable or slightly increase.

7. Household Simulation: What if Tariffs are Reduced by 10%?

Annual Expenditure for a Typical Four-Person Household (1.5L Oil Usage per Month): Current 14,400 yen
After 10% CIF Price Reduction: 12,960 yen
Exchange Rate Impact + Logistics Costs: +600 yen
Net Decrease Amount: ▲840 yen (▲5.8%)

→ Results in a savings effect of just under 1,000 yen annually.

8. Response Strategies for Small and Medium Food Manufacturers

Introduction of Oil-Saving Fryers to Reduce Usage by 15%
Creating Additional Income through Waste Oil Recycling
Switching to Domestic Rice Oil (Using FTA Framework)

9. Supply Chain and Geopolitical Risks

Route changes due to the Red Sea situation have increased transportation costs between Japan and India by 20-25%. The focus is on how to hedge external risks that cannot be covered by tariff reductions alone.

10. Eco-Sustainability Perspective

The ratio of RSPO-certified palm oil is 5% in India and 26% in Japan. There are voices suggesting that a period of price decline is an opportune time to shift towards sustainable oils and fats.

11. Voices on SNS: Expectations and Concerns

Main Discussion Points	Representative Posts (X)
Expectations for Price Pass-Through	"Japan should follow suit! It would help households." (@consumer_voice_jp)
Concerns About Unmet Price Reductions	"Will companies just turn the savings into profit?" (@watchdog_fx)
Sustainability	"Let's consider environmental impact over cheapness." (@greenchef)
Cooking Innovations	"Using a small spray reduced my oil costs by half." (@healthykitchen)

12. Future Outlook and Policy Recommendations

Negotiations to Expand EPA Quotas: Especially expanding low-tariff quotas for canola oil.
Establishment of Stockpiling Systems: Include raw oils as national stockpile targets.
Cultivation of Oil-Saving Culture: "Oil literacy" education in school home economics classes.

13. Conclusion

India's reduction of import tariffs is expected to ease global supply and demand for oils and fats, promoting a short-term price decline. However, in Japan, the effect of reducing household burdens is expected to be limited due to factors such as exchange rates, logistics, and high dependency on raw materials. It is essential for the government, industry, and consumers to work together to promote oil-saving, diversification, and sustainability, thereby building a market structure resilient to external shocks.

Reference Articles & Links

Reduction in Import Duty on Edible Oils to Help Improve FMCG Companies' Margins
Source: https://www.ndtvprofit.com/economy-finance/reduction-in-import-duty-on-edible-oils-to-help-fmcg-companies-improve-margins

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