The spectacular crash in oil prices has obvious benefits for Japan, which imports all of its energy, but analysts caution that cheaper oil may dash any hopes of the Bank of Japan (Tokyo Stock Exchange: 8301.T-JP) reaching its 2 percent inflation target.

"Cheap oil is good for profitability at Japanese corporations but has probably already tipped consumer price inflation (CPI) into negative territory," said Yasuhide Yajima, chief economist at the NLI Research Institute.

Both U.S. crude prices and Brent futures have more than halved since mid-2014, and hovered in Wednesday's trade at $46.27 and $46.90, respectively.

The Bank of Japan (BOJ) has set itself an inflation target of 2 percent by this year, as part of Prime Minister Shinzo Abe's radical plan to drag the economy out of two decades of deflation, and plunging oil prices may put that goal out of reach.

Already, the central bank is reportedly looking at cutting the target to 1.5 percent or lower, various media reported last week, on the back of lower oil prices. The revision could be announced as soon as the next policy meeting which will take place on January 20-21.

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"Even if the yen holds at around 120 yen against the dollar and oil prices rise back to above $60, core CPI in April 2015 - when the effects of the 3 percent consumption tax hike to 8 percent in April 2016 will be stripped out - will fall into the negative," said NLI's Yajima.

The CPI rate, with the effects of the sales tax hike stripped out, stood at 0.7 percent in November.

Unlike Yajima, Barclays doesn't think CPI is in negative territory yet, but that's on track to happen if the downward spiral in oil continues.

"A further drop in oil prices to $30 a barrel or lower... would push the on-year core CPI into negative territory in January 2016," Barclays said in a note on Tuesday.

Yen weakness to offset cheaper oil?

Some analysts also warn that the positive effect of cheaper crude prices, which trades in U.S. dollars, could be negated if the yen (Exchange: JPYUSD=) - which tumbled 40 percent against the greenback in the past two years - falls further.

"The effects for the economy are positive as long as current oil and yen levels hold," according to Toru Suehiro, economist at Mizuho Securities. Suehiro estimates the benefits will be cancelled out if the yen falls to 140 yen against the dollar, and oil rebounds to 60 dollars a barrel. The yen traded at 117.56 against the dollar early Wednesday.

But Martin Shultz, senior economist at Fujitsu Research Institute, argues that cheaper oil is a blessing even if the yen remains soft, particularly for small and medium sized enterprises (SMEs) that are being squeezed by the weaker Japanese currency and the subsequent higher cost of imports.