Japan's core consumer prices rose for the first time in 31 months in July, government data showed Friday, beating market expectations of a fall despite a revision to the data's base year.
The core consumer price index, which excludes volatile food prices, rose 0.1 percent from a year earlier, the first rise since December 2008, the internal affairs ministry said.
The market had expected prices to have fallen due to the yen's strength and the government's revision to the data's base year.
Japan has been plagued with a deflationary trend for years and the results came after the government changed the data's base year to 2010 from 2005, which was expected to put a downward bias on the data.
Analysts say the rise in July was just temporary and expect the yen's recent appreciation to add further downward pressure to consumer prices.
The yen rose to its post-war high of 75.95 to the dollar a week ago and was hovering around 77.00 yen on Friday.
"Considering the impact of the high yen and slowing overseas economies, in addition to the base-year revision, on-year changes in the core CPI are unlikely to turn positive for about the next two years," said Kyohei Morita, chief Japan economist at Barclays Capital.
A ministry official briefing reporters said higher petrol prices were the main factor in the latest increase.
"The rise in the national CPI in July was due largely to one-off factors such as temporary increases in gasoline prices and (the increasing price of) overseas package tours," said Tamai Chino, economist at Mizuho Research Institute.
"But as the Tokyo figures suggest, the deflationary pressure remains, and we think the core CPI will return to a falling trend again from the next release."
The internal affairs ministry said Tokyo-area consumer prices, a leading indicator for the national trend, fell an estimated 0.2 percent in August against a market forecast for a fall of 0.1 percent.
Economy Minister Kaoru Yosano told reporters at a briefing that he also saw no change in Japan's price trends with a gradual decline in place.
The market also continues to expect prolonged monetary easing. The Bank of Japan has said it will keep rates near zero until the nation's economy starts to overcome deflationary pressure.