(c) 2013, Bloomberg News.

(c) 2013, Bloomberg News.

TOKYO Japan's consumer prices increased at the fastest pace since 2008 in July, as energy costs rise and Prime Minister Shinzo Abe makes progress in pulling the economy out of 15 years of deflation.

Consumer prices excluding fresh food climbed 0.7 percent from a year earlier, the statistics bureau said Friday in Tokyo. That exceeded the median estimate of 29 analysts surveyed by Bloomberg for a 0.6 percent gain. Industrial output increased a less-than-forecast 3.2 percent from the previous month.

"Japan is moving into real inflation," said Junko Nishioka, chief economist at Royal Bank of Scotland Group in Tokyo and a former Bank of Japan official. "Today's data is encouraging for the BOJ, and they are likely to keep monetary policy on hold."

Higher energy costs following the shutdown of the country's nuclear reactors drove prices higher as the BOJ rolls out an unprecedented easing that helped spur a third straight quarter of growth. The central bank's pledge in April to double the monetary base over two years has weakened the yen, which has tumbled 20 percent against the dollar over the past year, making imported oil and wheat more expensive.

Stripping away energy and fresh food prices, deflationary pressures showed signs of easing. By that measure, prices fell 0.1 percent in July, slowing from a 0.2 percent decline in June, Friday's report showed. It was the smallest drop since February 2009, and less than a median forecast for a 0.2 percent drop in a Bloomberg survey.

The jobless rate was 3.8 percent, a separate government report showed Friday.

A sales-tax increase planned for April threatens to damp the economy's recovery even as it would help to shore up the nation's finances. Bank of Japan Deputy Governor Kikuo Iwata this week called for patience, saying it would take more time for the central bank's unprecedented monetary easing to trigger "persistent and steady pickups in prices and wages."

The BOJ's loosening is "in its early stages, and I hope you will be patient enough to see its effects permeate the economy," he said.

Wheat prices in Japan, which imports 60 percent of its food, will increase for the third time in a year on a weaker yen, with imports sold by the government to flour millers including Nisshin Seifun Group Inc. rising about 4.1 percent on average in October, the ministry of agriculture said on Aug. 28.

A maker of Japanese sake, Nihon Sakari Co., announced on Aug. 27 its first price increase in 19 years from October, citing rising prices raw material prices and higher logistical costs.

Oil rose to the highest level in two years this week on concern that a conflict in Syria may spread and threaten supply from the Middle East. Gasoline prices at home stayed at 160.2 yen ($1.64) per liter for a third straight week, the highest since October 2008, the trade ministry reported on Aug. 28.

"Price are rising, basically because of rising energy costs," said Masamichi Adachi, a senior economist at JPMorgan Chase in Tokyo and a former BOJ official.

Abe has summoned 60 economists, business leaders and representatives of consumers to discuss this week whether to lift the sales tax to 8 percent in April from 5 percent now, followed by another increase to 10 percent in 2015.

He will make a decision by early October, taking into account views of those people and economic data, including revised gross domestic product data for the second quarter on Sept. 9. Preliminary data showed annualized growth of 2.6 percent from the previous quarter.

The economy is moving in a positive direction in terms of being able to implement the sales-tax increase, Economic Minister Akira Amari told reporters in Tokyo Friday.

A higher levy would add to costs for households, even as income-growth remains stagnant, threatening to hurt consumer sentiment.

Wages fell or were unchanged in 10 of the 12 months through June, according to the Ministry of Health, Labour and Welfare. Consumer confidence fell for a second straight month in July as the ratio of those who expect prices to increase in a year rose to the highest level in almost five years, according to a Cabinet Office survey released on Aug. 9.

The BOJ is still distant from a goal of generating 2 percent inflation. Japan's break-even rate, derived from the difference between government bond yields and those on inflation-linked debt, signaled inflation of 1.16 percent in the next five years, down from as high as 1.84 percent on May 15.