Core consumer prices in the capital city rose 2.7 percent on year in April, the fastest gain since 1992 as an increase in Japan's sales tax drove up prices across the board.
The impact of the consumption tax hike is estimated to have boosted the reading by 1.7 percentage points. On April 1, Japan hiked its consumption tax to 8 percent from 5 percent, the first increase in 17 years, as part an effort to curb the nation's massive public debt.
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The increase in the core consumer price index, which excludes volatile fresh food prices but includes oil products, was slightly less than economists' median forecast for a 2.8 percent rise and followed a 1.0 percent gain in March.
Following the data release, Japanese Finance Minister Taro Aso said things are proceeding well in Japan's efforts to shake off deflation.
However, Izumi Devalier, Japan economist at HSBC, does not regard the latest inflation reading as particularly encouraging.
"The rise in Tokyo CPI from 1 percent to 2.7 percent is entirely due to the tax hike, underlying inflation is flat," Devalier said, noting that if the estimated inflation boost from the April tax hike is subtracted, April's CPI reading was unchanged from the previous month.
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While the risk of falling back into deflation is receding, Japan is far away from reaching the 2 percent inflation target in a sustainable manner, she said.
"We haven't seen the virtuous feedback loop where wage hikes lead to an increase in spending, which gives rise to inflationary pressures and allows businesses to raise prices further," she said.
"When the feedback loops breaks down you have a rise in prices with no improvement in income," she added.
Real wages, which take into account consumer inflation, dropped 1.9 percent on year in February, down for an eighth straight month, according to Reuters.
Prime Minister Shinzo Abe and his government have been publicly pressuring companies to raise wages, which is seen as a crucial factor to complement massive monetary and fiscal stimulus to try to pull the economy out of deflation.