By Yoshifumi Takemoto and Leika Kihara

TOKYO 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. It followed a 3.2% rise in June.

An index that strips away both fresh food and fuel costs rose 4.0% in July from a year earlier after increasing 3.8% in June, the data showed.

At the two-day meeting ending on Friday, the BOJ is expected to maintain its yield curve control (YCC) targets at -0.1% for short-term interest rates and 0% for the 10-year bond yield.

But the board may debate making minor tweaks to the policy if it feels the cost of YCC is beginning to outweigh the benefits, say sources familiar with its thinking.

(Reporting by Yoshifumi Takemoto and Leika Kihara; Editing by Sam Holmes)