By Yoshifumi Takemoto and Leika Kihara

TOKYO Japan's core inflation was steady in August and stayed above the central bank's 2% target for a 17th straight month, data showed on Friday, a sign of broadening price pressure that could heighten the case for an exit from ultra-easy monetary policy.

The data comes hours before the Bank of Japan (BOJ) concludes its two-day policy meeting that began on Thursday.

While the BOJ is widely expected to keep ultra-easy monetary settings unchanged, markets are focusing on any hints from Governor Kazuo Ueda on how soon it could phase out stimulus.

The nationwide core consumer price index (CPI), which excludes volatile fresh food but includes fuel costs, increased 3.1% in August from a year earlier, government data showed, compared with a median market forecast for a 3.0% gain. It followed a 3.1% rise in July.

The so-called "core core" index that strips away the effect of both volatile fresh food and fuel prices, rose 4.3% in August from a year earlier, following the same year-on-year pace of increase in July.

Markets are simmering with speculation the BOJ will soon end negative short-term interest rates and a 0% cap set for the 10-year bond yield in response to broadening inflationary pressure.

(Reporting by Leika Kihara and Yoshifumi Takemoto; Editing by Shri Navaratnam)