Japan's core inflation stays below central bank target

By Leika Kihara

TOKYO, April 24 (Reuters) - Japan's core consumer inflation slowed below the central bank's 2% target for a second straight month in March, data showed on Friday, as government fuel subsidies offset price pressures from the Iran war-induced energy shock.

Analysts expect inflation to accelerate back above the Bank of Japan's target in coming months, as companies begin to pass on higher fuel costs from the Middle East conflict.

The core consumer price index (CPI), which strips away the effect of volatile fresh food costs, rose 1.8% in March from a year earlier, matching a median market forecast. It followed a 1.6% rise in February.

A separate index excluding the effect of volatile fresh food and fuel, which is closely watched by the BOJ as a better gauge of demand-driven price moves, rose 2.4% in March from a year earlier after a 2.5% gain in February.

The data will be among factors the BOJ will scrutinise at next week's policy meeting, where the board is widely expected to hold off raising interest rates but signal its readiness to hike to counter mounting price pressures.

(Reporting by Leika Kihara; Editing by Sam Holmes)