By Leika Kihara and Takahiko Wada
TOKYO (Reuters) - Japan's core inflation slowed in June due to temporary cuts in utility bills but stayed above the central bank's 2% target, highlighting lingering price pressures that will keep alive market expectations for further interest rate rises.
The data will be among factors the Bank of Japan (BOJ) will scrutinise at its next policy meeting on July 30-31, when the board is expected to revise up its inflation forecast in a quarterly review of its projections.
The nationwide core consumer price index (CPI), which excludes volatile fresh food costs, rose 3.3% in June from a year earlier, government data showed on Friday, matching a median market forecast.
The rise was smaller than the 3.7% increase in May due largely to the resumption of fuel subsidies aimed at helping households weather the pain from higher living costs.
A separate index that strips away both fresh food and fuel costs - closely watched by the BOJ as a measure of domestic demand-driven prices - rose 3.4% in June from a year earlier after increasing 3.3% in May.
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 that Japan was on the cusp of sustainably hitting its 2% inflation target.
While the central bank has signalled its readiness to raise rates further, the economic impact of higher U.S. tariffs forced it to cut its growth forecasts in May and complicated decisions around the timing of the next rate increase.
Japan's economy shrank in the first quarter as rising living costs hurt consumption. Exports fell in May for the first time in eight months, stoking recession fears.
A slight majority of economists in a June Reuters poll expected the BOJ to forgo another rate hike this year.
(Reporting by Leika Kihara and Takahiko Wada; editing by Neil Fullick)
