A rise in Japan's key inflationary gauge Friday raised hopes that the world's third-largest economy was on course to expel its inflationary demons, but analysts told CNBC there was still much work to be done.
Japan's nationwide core consumer price index (CPI) climbed 0.7 percent on year in September. While slightly lower than August's 0.8 percent rise, the rise marked the fourth consecutive uptick.
The steady rise will be welcomed by the country's central bank governors, who are aiming to reach a target of 2 percent inflation by the end of 2014, as part of the government's plan to radically overhaul the economy and end 15 years of deflation.
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However, analysts told CNBC that it was too early to get excited over the recent inflation uptick.
"What we need to get the deflation demon out of the economy is a demand-driven improvement," said Martin Schulz, senior economist at Fujitsu Research Institute.
"Overall demand will be cyclical next year, but we will not see a stellar performance. We will have to wait for another year until deflation is really beaten in this economy," he added.
Many analysts have attributed the recent uptick in inflation data to higher energy import costs, rather than a substantial improvement in consumer spending or corporate investments, which effectively distorts the numbers.
With several of Japan's key nuclear power stations suspended, the country has to rely on imports to meet its energy needs, which have become more costly given the yen's near 12 percent decline against the dollar this year.
Schulz, too, attributed the recent rise in inflation to energy costs skewing the data. He also saw the planned consumption tax hike from 5 to 8 percent next April as a potential headwind.
"Right now we have a build-up of additional demand before the consumption tax hike, which will be implemented next spring, after that we will have a drop," he said.