Japan's key inflation gauge edged up in September, bringing the Bank of Japan back to the halfway point toward its price target, though gains are still largely limited to energy.

The acceleration in Japan's inflation backs up BOJ Gov. Haruhiko Kuroda's decision Thursday to upgrade his assessment of the current strength of price growth to around 1 percent from a range of 0.5 percent to 1 percent. Yet the renewed momentum still leaves the BOJ a long way from its inflation goal and still reliant on higher energy prices to pull up the overall index. As Kuroda said in a Bloomberg interview last week, the critical element needed to drive inflation toward 2 percent is higher pay that can fuel consumption.

"There is little change in Japan's price trend. Energy prices are driving the gains while price growth in other goods remains subdued," Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute, said before Friday's report was released. "The BOJ is surely aware that this isn't a time for them to be optimistic."

"Japanese companies strongly believe that higher prices are a way to lose customers," said Azusa Kato, an economist at BNP Paribas SA. "It's hard to say when the very tight labor market will start to have an effect on Japan's inflation."