By Yoshifumi Takemoto and Leika Kihara
TOKYO (Reuters) - Core inflation in Japan's capital slowed in July but remained well above the central bank's 2% target, data showed on Friday, keeping pressure on policymakers to dial back ultra-loose monetary policy.
The data for Tokyo, which is seen as a leading indicator of nationwide trends, comes ahead of the Bank of Japan's closely watched policy decision due later in the day.
The Tokyo core consumer price index (CPI), which excludes volatile fresh food but includes fuel costs, rose 3.0% in July from a year earlier, compared with a median market forecast for a 2.9% gain.
While the gain was slower than a 3.2% rise in June, Tokyo core inflation stayed above the central bank's 2% target for the 14th straight month.
An index that strips away both fresh food and fuel costs, which is closely watched by the BOJ as a better gauge of broad price trends, rose 4.0% in July from a year earlier, accelerating from a 3.8% gain in June, the data showed.
The increase was driven mostly by stubbornly high food prices in a sign of the strain households are feeling from rising living costs, the data showed.
The dollar dipped slightly to around 139.03 yen after the release of the Tokyo inflation data.
At the two-day meeting ending on Friday, the BOJ is set to keep ultra-low interest rates but may make minor tweaks to extend the lifespan of its yield control policy.
The Nikkei newspaper reported earlier on Friday the central bank will maintain its 0.5% cap for the 10-year government bond yield, but discuss allowing long-term interest rates to rise above that level by a certain degree.