Japan's core inflation rises for 1st time in over a year

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By Leika Kihara

TOKYO (Reuters) - Japan's core consumer prices rose for the first time in over a year in January due to a pickup in energy costs and private consumption, offering some hope for the central bank's efforts in accelerating inflation to its 2 percent target.

But household spending slumped in January even as the job market tightened further, underscoring the fragile nature of Japan's economic recovery.

The core consumer price index (CPI), which includes oil products but excludes volatile fresh food prices, rose 0.1 percent in January from a year ago, government data showed on Friday, posting the first increase since December 2015.

It compared with a median market forecast for a flat growth and followed a 0.2 percent drop in December.

A separate index that excludes the effect of energy and fresh food prices, but includes processed food costs, was up 0.2 percent in January from a year earlier, the government said.

Low inflation in Japan, a phenomenon seen for much of the past two decades, remains the biggest hurdle to fostering a durable economic recovery - a goal that has eluded policy makers since the late 1990s.

The ministry began releasing from Friday a new index on consumer prices that excludes the effect of volatile fresh food and energy costs, which it says is useful in tracking consumer price trends that strips away one-off factors.

Separate data showed household spending fell 1.2 percent in January from a year earlier, worse than a median market forecast for a 0.4 percent drop and marking the 11th straight month of declines. The jobless rate fell to 3.0 percent in January, matching a median forecast.

Japan's economy expanded in July-September and analysts expect growth to pick up in coming quarters, thanks to a recent rise in exports and factory output driven by improvements in emerging economies.

Policymakers hope that prospects of a sustained recovery will prompt companies to boost wages and household spending, seen as a soft spot in the world's third-largest economy.

Many analysts expect core consumer prices to head toward 1 percent later this year, though that will still keep inflation distant from the BOJ's ambitious 2 percent target.

(Reporting by Leika Kihara; Editing by Shri Navaratnam)