Japan's core inflation accelerates in October, stays above BOJ target

By Leika Kihara

TOKYO, Nov 21 (Reuters) - Japan's core consumer prices rose 3.0% in October from a year earlier, data showed on Friday, staying above the central bank's 2% target and keeping alive expectations of a near-term interest rate hike.

The increase in the core consumer price index (CPI), which excludes volatile fresh food but includes fuel costs, matched a median market forecast and accelerated from a 2.9% rise in September.

An index stripping away both volatile and fresh food and fuel costs, which is closely watched by the BOJ as a better gauge of underlying price trends, rose 3.1% in October from a year earlier, compared with a 3.0% increase in September.

The data will be among factors the central bank will scrutinise in deciding whether to raise interest rates at its next policy meeting on December 18-19.

The BOJ exited a decade-long, radical stimulus programme last year and raised short-term interest rates to 0.5% in January on the view Japan was on the cusp of sustainably hitting its 2% inflation target.

While consumer inflation has exceeded the BOJ's 2% target for well over three years, Governor Kazuo Ueda has stressed the need to tread cautiously in further rate hikes due to uncertainty over the impact of U.S. tariffs on Japan's economy.

He has also said Japan needs to see sustained inflation driven by solid domestic demand and wage gains for the BOJ to resume its rate-hike cycle.

But two of the BOJ's nine board members dissented from the bank's decision to keep rates steady in September and October, proposing instead to raise borrowing costs to 0.75%, in a sign of the bank's increased focus on inflationary risks.