There are a few verbs that do this. It's not just 思う but also 考える.
I tried coming up with an English parallel but after a few goes decided that they don't work. The source difference as I see it is that the Japanese language has a stricter account of philosophy of mind that works from the idea that we don't have access to the thoughts and feelings of others.
Thus, in Japanese, Verbs about people's thought processes and other things that are somewhat opaque to observes work a little differently than things that are openly apparent (e.g. kicking a ball).
It's a little Wittgenstinian, but there's really a difference in meanings between:
I feel sad
I think we should have no nuclear weapons
He feels sad
He thinks we should have no nuclear weapons
In the former case, the normal interpretation with mental verbs is that you cannot be wrong as you are expressing with the sentence your thoughts. In the latter, what we mean is that someone appears to have that thought, feeling, or emotion, because we don't have direct access to these things.
Why does this block 思う but not 思っている. I think Darius's example to a near-duplicate is great on that point. The instant duration of the simple verb form is different than the ~ている form which expresses of a duration. Also, his answer explains why the past tenses are different.
With your example pair, we can say both in English. But the meaning of the word "thinks" if we render your sentence in English means that Smith makes the judgment that Japan has high prices.
I found this explanation:
「と思う」は,もっぱら発話時における話者自身の命題に対する蓋然的判断を表す。したがって,「と思う」 が文末に現れている文は主語が一人称に限られる。なお,「思っている」のようなテイル形や「思っ た/て いる らしい」のようにタ形やテイル形にムードが後接している場合は,他者の思考内容を表すことも可能
The relevant point is that the dictionary form indicates the speaker's view at the 発話時 (moment of utterance). Assuming you don't have access to other people's thoughts instantly, you need to use a stative construction to express what is inside their heads and inaccessible.