Japanese core inflation, which excludes food prices, edged up to a fresh five-year high of 1.3% on year in December from +1.2% in November and topped consensus of 1.2%.
Core core CPI, which excludes food and energy, rose to a new 16-year peak of 0.7% vs +0.6% a month earlier.
Overall inflation increased to 1.6% from 1.5%.
While CPI is heading towards the Bank of Japan's target of 2%, the government wants businesses to increase wages in order to solidify the rise in inflation, the test of which will come in Spring wage negotiations. There are also concerns about the impact of an increase in sales tax in April
"Consumers will be hit in the pocket from rising prices and the upcoming sales-tax hike," says JPMorgan's Masamichi Adachi. "The onus is now on companies to convert their profits into wage increases and capital spending."
Workers may be aided in their negotiations by a surplus of jobs: the number of positions for every person looking rose to 1.03, passing one for the first time since October 2007.
The unemployment rate dropped to the lowest number since December 2007, falling to 3.7% in December 2013 from 4% in November and vs forecasts of 3.9%.
Industrial production +1.1% on month vs -0.1% and +1.2%.
Overall household spending +0.7% vs +0.2% and +1.2%.
The Nikkei is -0.6% and the USD-JPY is -0.3% at ¥102.43.