By Leika Kihara
TOKYO (Reuters) -Core consumer inflation in Japan’s capital slowed in August but stayed above the central bank’s 2% target, data showed on Friday, keeping alive market expectations of a resumption in interest rate hikes.
The Tokyo core consumer price index (CPI), which excludes volatile fresh food but includes fuel costs, rose 2.5% in August from a year earlier, government data showed, matching a median market forecast and slowing from a 2.9% rise in July.
An index that strips out both volatile fresh food and fuel costs, which is closely watched by the Bank of Japan (BOJ) as a better gauge of underlying inflation, rose 3.0% in August from a year earlier, the data showed. It followed a 3.1% rise in July.
The BOJ ended a massive, decade-long stimulus programme last year and raised short-term interest rates to 0.5% in January, on the view that Japan was on the cusp of durably hitting its inflation target of 2%.
While consumer inflation has held above 2% for well over three years, BOJ Governor Kazuo Ueda has stressed the need to tread cautiously on further rate hikes, due to an expected hit to the economy from U.S. tariffs.
But stubbornly high food inflation and prospects of sustained wage growth have led some BOJ board members to warn of second-round price effects that could warrant another rate hike, a summary of the bank’s July meeting showed.
Nearly two-thirds of economists polled by Reuters in August expect the BOJ to raise its key interest rate by at least 25 basis points again later this year, up from just over half a month ago.
(Reporting by Leika Kihara; Editing by Sam Holmes)
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