But household spending fell 1.3 percent on-year in April, disappointing expectations for a 3.1 percent increase from a Reuters poll. On month, household spending dropped 5.5 percent, compared with the Reuters poll forecast for a 0.7 percent drop.
"Plainly, a consumption-led economic recovery is not yet in sight," a report from DBS said. With the global economy slowing, it is "critical" for consumption to speed up and pick up the slack if manufacturing and exports slow, it noted.
"It remains unclear whether wage growth has picked up sufficiently and how well consumers' purchasing power has been restored," the note added.
But Goldman's Matsui sees the wage situation improving. "The spring wage negotiations were concluded just before this data came out," she said, noting indications are base wages will be rising around 2.5 percent this fiscal year, better than last year's 2.2 percent.
"There are more jobs available than Japanese people looking for work. A very tight job market means there's a lot of job security. So I think give it a few more months and we're going to see better wages and real income numbers coming through," she added.
She expects that will help to drive improved inflation ahead, although she noted that levels still remain far from the Bank of Japan's targeted 2 percent rate.
Economists have been watching Japan's economic data closely for signs Abenomics, or Japanese Prime Minister Shinzo Abe's plan to kick-start the long-moribund economy out of its decades-long struggle against deflation, has made any progress. Results so far have been spotty.
Expectations are rising that the Bank of Japan (BOJ) will have to do more to support the economy. The central bank last expanded it's massive asset purchases to 80 trillion yen ($646 billion) a year in October.
"With economic activity sluggish and price pressures subdued despite a tighter labour market, we remain convinced that the Bank of Japan will have to step up the pace of easing before too long," Marcel Thieliant, Japan economist with Capital Economics, said in a note.
The yen strengthened just a tad after the inflation data, with the U.S. dollar fetching 123.71 yen from around 123.8 prior to the release, before the pair returned to around earlier levels. The Nikkei 225 index opened flat.