UPDATE 1-Japan core CPI rises for 4th straight month

* Nationwide April core CPI up 0.3 pct vs f'cast +0.4 pct

* Tokyo May core CPI up 0.1 pct vs f'cast flat growth

* BOJ seen keeping stimulus with price target elusive

TOKYO, May 26 (Reuters) - Japan's core consumer prices rose 0.3 percent in April from a year earlier to mark a fourth straight month of increases, offering policymakers some hope a steady economic recovery will help shift consumers' sticky deflationary mindsets.

But the increase was due largely to the fading effect of last year's energy price falls, underscoring the challenges the Bank of Japan still faces after years of heavy monetary stimulus to reach its ambitious 2 percent target.

The rise in the core consumer price index (CPI), which includes oil products but excludes fresh food prices, followed a 0.2 percent increase in March, data from the Internal Affairs Ministry showed on Friday.

It was smaller than a median market forecast for a 0.4 percent gain.

Stripping away the effect of fresh food and energy, consumer prices were flat in April from a year ago.

Core consumer prices in Tokyo, available a month before the nationwide data, rose 0.1 percent in May from a year earlier, against flat growth projected by analysts in a Reuters poll.

Japan's economy grew in the first quarter at its fastest pace in a year to mark the longest period of expansion in a decade, thanks to robust exports and a helpful boost from private consumption.

Nonetheless, weak household spending and poor corporate pricing power have kept inflation around zero for almost two years, forcing the BOJ to revamp its policy framework to one better suited for a long-term battle against deflation.

With the economy showing signs of life, many analysts now expect the BOJ's next move to be a reduction - rather than an expansion - of its monetary stimulus.

But BOJ officials have stressed that any reduction in stimulus would be some time away, pointing to the fact inflation remains distant from their target.

(Reporting by Leika Kihara; Editing by Eric Meijer)