Consumer inflation in the Tokyo metropolitan area eased in June but remained firmly above the Bank of Japan’s 2% target, leaving the central bank balancing on a policy tightrope.

Inflation in Tokyo slowed for the first time in four months as energy price gains eased and the municipal government waived some water charges for households ahead of a national election likely to center on the cost-of-living crunch.

Core consumer inflation in Japan's capital slowed sharply in June due to temporary cuts to utility bills but stayed well above the central bank's 2% target, keeping alive market expectations for further interest rate hikes.