TOKYO (Reuters) - Japan’s core inflation slowed to its weakest in about two years in June, underlining policymakers’ long battle to boost consumer prices and adding to speculation the Bank of Japan could deliver more stimulus later this month.

FILE PHOTO: A shopper looks at items at a supermarket in Tokyo February 26, 2015. REUTERS/Yuya Shino/File Photo

With the global economy slowing and factory production faltering in the face of the Sino-U.S. trade war, BOJ officials have said they remain ready to expand stimulus, joining the U.S. Federal Reserve in signaling an easing may be coming soon.

Indeed, BOJ Governor Haruhiko Kuroda said on Thursday the central bank will scrutinize economic developments until the last minute in deciding policy this month, suggesting that whether to stand pat or increase stimulus will be a close call.

Japan’s core consumer price index, which includes oil products but excludes fresh food prices, rose 0.6% in June from a year earlier, matching economists’ median estimate.

The June reading was the weakest since July 2017 when the index climbed 0.5% and compared with a 0.8% gain in May.

The so-called core-core CPI, which strips away the effects of volatile food and energy costs, was up 0.5% in June from a year earlier. It is closely watched by the BOJ to gauge how much the economy’s strength has translated into price gains.

Despite years of heavy money printing, the data shows the central bank is still a long way off from achieving its elusive 2% inflation target as the U.S.-China trade dispute and slowing global demand put pressure on the export-reliant economy.

“The global economy is weakening and energy prices are on the decline, while Japan’s wage recovery is sluggish. Consumer inflation has not risen as per the BOJ’s scenario,” said Hiroaki Mutou, chief economist at Tokai Tokyo Research Institute.

“As the Fed is expected to cut rates in July, I think the BOJ will have to take action as the central bank is concerned about the yen’s move.”

The biggest contributory factor for the lower June core CPI index was a sharp slowdown in energy prices. Reductions in mobile charges by Japan’s major mobile carriers also weighed on the index.

Analysts expect core consumer prices will remain subdued in coming months due to the recent oil tumble - a supply-side issue that adds to Japan’s protracted demand-led inflation problem.

Tokyo’s core CPI index, available a month before the nationwide data, was seen rising 0.8% in July from a year earlier, a Reuters’ poll showed, slowing from a 0.9% gain in June.

The government will publish the core CPI for Tokyo on July 26.

With the global outlook increasingly clouded, a growing number of market players expect the BOJ’s next move will be to loosen monetary policy, with some betting on action as early as the next rate review on July 29-30.

Many BOJ officials are wary of ramping up an already massive stimulus program that has pushed borrowing costs to zero, straining commercial banks’ margins and leaving the central bank with little ammunition to fight the next economic downturn.

Yet, global strains are pushing many policymakers to switch gears. South Korea, South Africa and Indonesia all eased policy on Thursday.

Fed policymakers, moving toward their first interest rate reduction in a decade later this month, have sketched out arguments for whether rates should be cut by a quarter or a half a percentage point.