Core inflation in Japan's capital slows in December but stays above BOJ target

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Tokyo December core CPI up 2.3% yr/yr vs forecast +2.5%

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Index excluding fresh food, fuel rises 2.6% yr/yr in December

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BOJ next meets for policy meeting January 22-23

By Leika Kihara

TOKYO, Dec 26 (Reuters) - Core consumer prices ?in Japan's capital rose 2.3% in December from a year earlier, data showed on Friday, ?staying above the central bank's 2% target and firming the case ?for further interest rate hikes.

The increase in the ?Tokyo core ?consumer price index, which excludes volatile costs of fresh food, compared with a median market ?forecast for a 2.5% rise. It ?slowed from a 2.8% increase in November, due largely to a fall in utility bills.

A separate index ?for Tokyo that strips away ?both ?fresh food and fuel costs - closely watched by the Bank of Japan as a measure of demand-driven prices - rose 2.6% in ?December from a year earlier after a 2.8% increase in November.

The data will be among the factors the BOJ will scrutinise at its next policy meeting on January 22 and 23, when the board issues fresh quarterly growth and inflation forecasts.

The BOJ ?raised ?interest rates last week to a 30-year high of 0.75%, taking another landmark step in ending decades of huge monetary ?support in a sign of its conviction Japan is progressing toward durably hitting its 2% inflation target.

With core inflation exceeding the BOJ's target for nearly four years, Governor Kazuo Ueda has signalled the BOJ's readiness to keep raising rates if the economy continues to improve, backed by solid ?wage gains.

Some analysts say the yen's recent declines could add to inflationary pressure through rising import costs, a point a few BOJ board members flagged at ?last week's policy meeting.

(Reporting by Leika Kihara; Editing by William Mallard)