Eight straight months of price rises suggest Japan is shaking off deflation, but analysts fear that Asia's number two economy is still not getting the right kind of inflation – one underpinned by wage rises.
Core consumer prices, which strip out volatile food prices but include oil products, rose 1.3 percent in January from a year earlier, data on Friday showed. That compared with forecasts for a 1.2 percent increase and followed a 1.3 percent rise in December which was the fastest rise since October 2008.
(Read more: A good start to the year for Japan's economy)
While a comforting sign for the Bank of Japan (BOJ) and Prime Minister Shinzo Abe, hoping to revive the economy after almost two decades of deflation and poor economic growth, wage rises remain the missing piece of Japan's inflation story, analysts say.
Chris Weston, chief market strategist at trading firm IG, says that bond markets are pricing in inflation to average about 2.25 percent in Japan over the next five years, but wage growth adjusted for inflation continues to fall – a worrying sign.
"You need wage rises to grow faster than inflation to create the backbone of inflation," he said. "But so far, we have mostly imported inflation because of the weak yen."