The annual increase in the core consumer price index, indicating forward movement in the government's effort to lift the economy from 15 years of falling prices, was boosted by December's core CPI increase of 1.3 percent from the same month of the previous year, or better than from November's increase of 1.2 percent, the Ministry of International Affairs and Communications said on its website.
Core CPI excludes volatile free food costs.
The 2013 increase of 0.4 percent compared with a decline of 0.1 percent in 2012.
In their anti-deflation fight, Prime Minister Shinzo Abe's government and Japan's central bank have introduced a number of stimulus measures. Among them is the target to double inflation to 2 percent by 2015.
The 2013 increase was partly due to higher energy import costs as a result of a lower yen. Currency depreciation makes exports less expensive but also makes imports costlier.
There is also concern the improving inflation climate could be affected by the domestic sales tax hike, scheduled to go up to 8 percent from April from the current 5 percent. A higher tax could discourage consumer spending and thus impact prices from rising further.
But Economic and Fiscal Policy Minister Akira Amari told a news conference Friday the economy is "proceeding smoothly" toward achieving the 2 percent inflation target, while noting wage increases would be important for future economic growth, Kyodo News reported.
"A virtuous cycle will be realized when wages are increased to a level sufficient to absorb price rises," Amari said.
Yuichiro Nagai, economist at Barclays Securities Japan Ltd., told Kyodo the economy appears on track to overcome deflation.
"The economy is expected basically to continue recovering," he said, adding it will return to positive growth after the initial impact from the sales tax hike.
Other data released Friday showed Japan's jobless rate dropped to 3.7 percent in 2013 from 4.3 percent in 2012, the third straight years of decline.
The ministry, noting that household spending is picking up, left its basic assessment unchanged from the previous month.
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