TOKYO (Reuters) – Core consumer prices in Tokyo, a leading indicator of nationwide inflation, rose 0.5% in October from a year earlier, data showed on Tuesday, staying distant from the Bank of Japan’s elusive 2% target and keeping it under pressure to ramp up stimulus.

The data offered the first clue on how a sales tax hike that kicked off in October could affect price growth, which remains subdued despite years of heavy money printing by the BOJ.

The rise in the core consumer price index (CPI) in the Japanese capital, which includes oil products but excludes fresh food prices, was slower than a median market estimate for a 0.7 percent gain and flat from the pace of increase in September.

“Companies aren’t translating the tax hike impact onto consumers as much as expected,” said Mari Iwashita, chief market economist at Daiwa Securities.

“The BOJ is likely to trim its inflation forecast at its quarterly report for October,” she said, adding that the nationwide core CPI is likely to hit 0.5% in October.

Japan’s government proceeded with a twice-delayed increase in the sales tax rate to 10% from 8% in October as part of efforts to rein in the country’s huge public debt.

To ease the burden from the higher levy, the government started to offer discounts or make childcare services free of charge from October.

When excluding the impact of the tax hike and the childcare discount, core consumer inflation in Tokyo hit 0.34% in October to mark the slowest pace in more than two years, according to the government’s estimate.

Years of ultra-loose policy has failed to fire up inflation to the BOJ’s 2% target, forcing the central bank to maintain its massive stimulus programme despite the strain on financial institutions’ profits from near-zero interest rates.

In forecasts made in July, the BOJ was counting on nationwide core consumer inflation hitting 1.0% in the current fiscal year ending in March 2020, including the effect of the higher tax.

The central bank is likely to trim the inflation forecast at the October quarterly report, which will be issued after a rate review on Thursday, sources have told Reuters.

But it is leaning toward keeping policy steady as stable markets, a truce in U.S.-China trade talks and robust domestic demand give it room to save its dwindling ammunition to fight the next recession, they said.