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Is Japan's economic recovery gaining traction?

Pedestrians and shoppers walk through the Odaiba area of Tokyo, Japan.
Tomohiro Ohsumi | Bloomberg| Getty Images
Pedestrians and shoppers walk through the Odaiba area of Tokyo, Japan.

Japan's core consumer inflation rose to its highest in almost five years in July, while industrial output posted a strong rebound and the jobless rate fell to its lowest level since 2008, data on Friday showed, in the latest signs that a recovery in the world's third largest economy is taking hold.

The core consumer price index (CPI) rose 0.7 percent in July from a year earlier, hitting its highest level since November 2008.

That was just above estimates for a 0.6 percent rise by analysts polled by Reuters and marked the second consecutive month of gains. The news is likely to be welcomed by the Bank of Japan which embarked on aggressive monetary stimulus earlier this year to push the country out of deflation.

(Read more: Is Kuroda too 'in love' with his own policies)

In other data, Japan's seasonally-adjusted unemployment rate meanwhile fell to 3.8 percent in July from 3.9 percent in June, its lowest level since October 2008, while industrial output in the month rose 3.2 percent from a month earlier.

The rise in output was below forecasts in a Reuters poll for a 3.7 percent increase and compared with a 3.1 percent fall in June.

"Things are improving and it's good to see production is improving and the labor market is recovering, which means more purchasing power and more stable demand," Jesper Koll, head of Japanese equity research at JPMorgan Securities in Tokyo, told CNBC Asia's "Squawk Box."

"The overall picture out of Japan is very clear – we do have a broadening of the economic recovery," he added.

Among the slew of economic numbers released by Japan on Friday were household spending data for July. That showed spending in the month rose a higher-than-expected 0.9 percent from a month earlier.

Japan's policy makers have made a concerted bid this year to revive the economy fortunes of a country, which has been hampered by deflation for the past two decades and slipped in and out of recession in recent years.

The upbeat economic news helped underpin gains in Japan's benchmark stock index, which rose 0.4 percent in early Asia trade.

(Read more: Is it 'all systems go' after Abe's big election win?)

With regards to the inflation numbers, analysts noted that the bulk of the rise in core consumer prices still came from energy prices. They add that in order to really beat deflation, there needs to be more evidence of broad-based price increases.

And, when food and energy prices are stripped out, the official data showed that Japan's consumer prices fell 0.1 percent in the year to July, versus a 0.2 percent fall in June.

Contact World Economy

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