Japan’s government says the latest economic data prove its policies are working with deflation finally being tackled after 15 years.
In July, prices and incomes rose, unemployment fell and factory activity gathered momentum.
Household spending edged up as the feel-good sentiment prompted consumers to eat out more and increase their spending on travel and leisure.
Core inflation – which includes oil products but not fresh food – was up 0.7 percent from a year ago.
That was largely due to higher electricity bills and a weaker yen pushing up import costs, but the job market strength and rising incomes should boost personal consumption.
Prime Minister Shinzo Abe and the Bank of Japan have gambled on massive fiscal and monetary stimulus to spark life into the world’s third-largest economy.
Critics argue the benefits of that stimulus may be short-lived and won’t make companies spend more on investment and wages.
By the numbers
The core-core inflation index – which excludes food and energy prices – was down 0.1 percent in the year to July, a slower pace of decline than June’s 0.2 percent fall.
Factory output rebounded 3.2 percent in July and manufacturers expect further gains in the coming two months, consistent with business surveys showing manufacturing grew for a sixth straight month in August.
The jobless rate improved for the second straight month in July to hit 3.8 percent in July, the lowest since October 2008.
Wage-earners’ incomes rose an annual 1.3 percent in July, increasing for the fifth straight month.
Japan’s economy grew an annualised 2.6 percent in April-June to mark the third straight quarter of expansion.