By Kaori Kaneko
TOKYO (Reuters) - Japan's core consumer prices rose in December from a year earlier, data showed on Friday, accelerating from the previous month, but inflation was still well away from the central bank's elusive 2% target.
Tame consumer inflation underscores the challenges the Bank of Japan is facing, with the core consumer price index rising just 0.7% in December from a year earlier, government data showed.
The data release came after the BOJ on Tuesday revised down its consumer price forecasts, despite the central bank having nudged up its economic growth projections.
The BOJ kept its policy unchanged this week and Governor Haruhiko Kuroda reiterated the central bank's resolve to maintain its ultra-easy policy in light of soft inflation and lingering uncertainty abroad.
The 0.7% rise in the core consumer price index (CPI), which includes oil costs but excludes volatile fresh food prices matched a media forecast.
In November, the index rose 0.5%.
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, grew 0.9% in December from a year earlier, after a 0.8% increase in November.
The nation's economy expanded an annualized 1.8% in the third quarter thanks to resilient domestic demand and business spending.
But exports fell for a 13th straight month in December, hurt by U.S.-bound shipments of cars, construction and mining machinery, suggesting weak external demand is likely to remain a drag on the trade-reliant economy for a while longer.
Analysts expect the economy probably shrank in the fourth quarter as a sales tax hike in October hit consumer spending.
The central bank could consider watering down later this year its commitment to keep or cut its rock-bottom interest rates, if pessimism over the global outlook continues to recede, sources say.
