Consumer prices in Japan rose unexpectedly by 0.1% in July 11 over the previous month due to higher energy costs.
Since the early 1990s Japan has been fighting sluggish prices amid slowing consumer demand. But experts are of the opinion that the latest rise in consumer prices could be an aberration and unlikely to end the country's fight against deflation. Durable goods prices are also likely to fall with inventory piling up and bleak sales are likely to trigger further price war.
Deflation has hurt Japan's recovery from the global financial crisis and the earthquake and tsunami in March 11.
As prices fall, consumers keep aside their money in the hope that prices will fall further, thus having a negative impact on domestic demand.
The latest data also showed that consumer prices in Japan, excluding food and energy, fell 0.5% from a year ago, which analysts warned a cause for concern.
Yuuki Sakurai of Fukoku Capital Management added that the authorities have yet to find a sustainable solution to the problem and given the recession in the global economy, this is unlikely to reverse in the near future.