Japan's core consumer prices, which exclude volatile food prices, rose 0.8 percent in August from a year earlier, recording their biggest annual rise in almost five years.
The rise in the core consumer price index (CPI) marked the third straight month of increases and was above analyst expectations in a Reuters poll for a 0.7 percent rise.
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It is the latest sign that aggressive monetary easing from the Bank of Japan this year is helping to push Japan out of the deflation that has hampered the economy for almost two decades.
Higher energy prices helped boost inflation, while a weak yen lifted the cost of imports and is something that could undermine consumer spending going forward.
And despite the positive CPI number on Friday, some economists say it's still too early to call a turnaround in Japan's inflation outlook.
"In our view, this is still early days," Paul Gruenwald, chief economist, Asia Pacific at Standard and Poor's Ratings Services, told CNBC Asia's "Squawk Box."
"We have to dislodge two decades of deflation expectations to get back to 2 percent inflation and we'll wait to see if Mr. Kuroda aggressively uses his balance sheet to make that happen," he added, referring to Bank of Japan Governor Haruhiko Kuroda.
Japan's consumer price index, when food and energy prices are stripped out, fell 0.1 percent in August from a year earlier, the same pace of decline seen in July.
The BOJ has a 2 percent inflation target, which it plans to meet over a two-year time frame by pumping more than $70 billion a month into the economy.
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Weakness in the yen, which has fallen 15 percent against the dollar this year, is seen as key to pushing Japan out of deflation.
"Dollar-yen is kind of tough here, it's basically just tracking the spread between U.S. Treasuries and JGBs [Japanese government bonds]," said Mirza Baig, head of foreign exchange and interest rate strategy for Asia at BNP Paribas.
"There is a continuing bias to want a weaker yen but honestly I don't see the catalyst for a very sharp move higher when Treasury yields are trading in such an anchored manner, so we'll have to wait for dollar-yen to go higher when domestic story really picks up," he added.