BoJ's chief faces crucial test this week on rates rise

But inflation remains tame, with core consumer prices up just 0.1 percent in December from a year earlier.

Hiromichi Shirakawa, chief economist for Japan at Credit Suisse, said the BoJ had been overly optimistic when it had earlier forecast steadier wage costs and easing downward price pressures.

"It's very difficult to argue that deflation is ending in Japan," he said.