* June core CPI -0.2 pct yr/yr vs forecast 0.0 pct
* Energy prices weigh on consumer prices
* Pressure may mount on BOJ to ease policy
By Leika Kihara and Kaori Kaneko
TOKYO, July 27 Japan's core consumer prices
unexpectedly fell in June from the same period a year earlier as
energy prices weakened, and mild deflation is likely to persist
given companies are reluctant to raise wages due to uncertainty
about the global economy.
The data suggest that the Bank of Japan will remain under
pressure to ease monetary policy to ensure prices start rising
and to shield the economy from any damage from a strong yen.
The 0.2 percent annual decline in core consumer prices in
June compared with the median estimate for a flat reading and a
0.1 percent decline in the year to May.
In a more troubling sign, the so-called core-core inflation
index, which excludes food and energy prices and is similar to
the core index used in the United States, fell in June, showing
that improvement in domestic demand from last year's earthquake
has been slow to feed into prices.
"The core-core CPI shows that overlying demand is not that
strong and deflation will remain for a while," said Michinao
Okachi, economist at Mizuho Research Institute.
"The BOJ seems to be more focused on currency moves than on
consumer prices. The impact of currencies on consumer prices is
limited, but if downside risks from Europe increase, more easing
may be necessary."
The core-core inflation index, fell 0.6 percent in the year
to June, data from the internal affairs ministry showed on
Core consumer prices in Tokyo, available a month before the
nationwide data, fell 0.6 percent in the year to July. That
compares with the median estimate for a 0.7 percent annual drop.
The BOJ set a 1 percent inflation target and eased policy
via an increase in asset purchases in February. It followed up
with another easing in April to show its resolve to beat
deflation. The central bank next meets Aug. 8-9.
Consumer prices could rise by 1 percent not long after
fiscal 2014 as the output gap gradually narrows, BOJ Governor
Masaaki Shirakawa said earlier this month.
However, two new members of the central bank's policy board
have said this forecast may be overly optimistic, suggesting
differences could emerge over the scale of additional monetary
Japan's economy is expected to outperform most other
developed nations this year thanks to solid domestic demand, but
analysts have slashed forecasts for factory output as the global
slowdown becomes more pronounced, according to a Reuters poll
earlier this month.
Japan's economy, the world's third-largest, is set to grow
2.2 percent in the year to next March, according to a Reuters
poll of economists, slightly slower than the 2.3 percent
pace seen in a similar survey in June.