Japan's core consumer prices rose for the first time in over a year in January thanks to a pickup in energy costs, but a slump in household spending showed why economic growth and inflation have lagged the more ambitious goals set out by policymakers. As rising protectionism in the United States poses risks for the world's third-largest economy, as well as the rest of export-reliant Asia, there is a danger companies will shy away from boosting wages seen as crucial for durable growth.
That will also undermine the Bank of Japan's efforts to accelerate inflation to its still-distant 2 percent target, analysts say.
Government data showed on Friday the core consumer price index (CPI), which includes oil products but excludes volatile fresh food prices, rose 0.1 percent in January from a year ago, posting the first increase since December 2015.
It compared with a median market forecast for a flat growth and followed a 0.2 percent drop in December.
Many analysts expect core consumer prices to head toward 1 percent later this year. But that would still be half-way to the BoJ's goal, which was put into perspective by separate data showing household spending slipped in January even as the job market tightened further.
The government began releasing from Friday a new index on consumer prices that excludes the effect of volatile fresh food and energy costs, which it says is useful in tracking consumer price trends that strips away one-off factors.
The index was up 0.2 percent in January from a year earlier, suggesting that recent yen declines are pushing up imported goods prices.
Low inflation in Japan, a phenomenon seen for much of the past two decades, remains the biggest hurdle to fostering a durable economic recovery - a goal that has eluded policy makers since the late 1990s.
Separate data released on Friday underscored the dilemma. The jobless rate fell to 3.0 percent in January, a level many analysts see as near full employment.
But household spending slumped 1.2 percent in January from a year earlier, marking the 11th straight month of declines, a sign consumers are unconvinced that wages will increase.