Core consumer prices in Japan's capital rise 1.8% in Oct

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Rise in Tokyo core CPI above forecast

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Inflation excluding fresh food, fuel accelerates to 1.8%

By Makiko Yamazaki

TOKYO, Oct 25 (Reuters) - Core consumer prices in Japan's capital rose 1.8% in October from a year earlier, data showed on Friday, slipping below the central bank's 2% target for the first time in five months.

The Tokyo inflation figures are considered a leading indicator of nationwide trends. The latest data will be among factors the Bank of Japan (BOJ) will scrutinise at next week's policy meeting, when the board releases fresh quarterly growth and price forecasts.

The increase in the core consumer price index (CPI), which excludes volatile fresh food costs, was faster than a median market forecast of 1.7% and followed a 2% gain in September.

A separate index that strips away the effects of both fresh food and fuel costs, closely watched by the BOJ as a broader price trend indicator, rose 1.8% in October from a year earlier after a 1.6% rise in September.

Japanese firms typically make biannual revisions to prices for goods and services in October.

That means service inflation for the month is a closely watched indicator for clues on whether demand-driven price gains are broadening enough to justify further rate hikes.

Services prices in non-public sectors rose 1.1% year-on-year in October, slower than a 1.2% gain in September.

BOJ Governor Kazuo Ueda has said the bank will keep raising rates if inflation remains on track to stably hit 2% as it projects. But he stressed the bank will spend time gauging how global economic uncertainties affect Japan's fragile recovery.

A slim majority of economists polled by Reuters saw the BOJ forgoing a hike this year, with most expecting the central bank to raise rates again by March next year.

(Reporting by Makiko Yamazaki; Editing by Sam Holmes)