Conveyor belt sushi is now a key indicator of Japanese consumer prices

The consumer price index rose 0.3% on the 2005 figure, suggesting a healthy level of inflation has been reached.

The sample of products the index is calculated against was altered recently to reflect changing spending patterns.

It has more hi-tech items, including flat-screen TVs and DVD recorders, as well as conveyor belt sushi.

Deflation defeated?

Some economists said the evidence of price rises was more confirmation that Japan was winning its seven-year battle against deflation - a trend of falling prices that hits profits and wages and discourages spending and investment.

The core price index, which excludes fresh food, rose by a less than expected 0.2%.

But with energy costs excluded as well, the index actually fell 0.3% in July - supplying ammunition to those who are still worried about falling prices.

Japan's main weapon against deflation has been its zero-interest rate policy, which it held for six years until raising it to 0.25% in July after a string of reports suggested prices were rising and the economy was growing.

The central bank has held its key interest rate at 0.25% this month, and said it would only increase rates gradually.

"I think we will have to wait until next year before the CPI (core price index) excluding food and energy starts rising," said Takahide Kiuchi, chief economist at Nomura Securities.