UPDATE 1-Japanese firms expect only modest inflation pickup over next year - BOJ

BOJ@ (Adds breakdown of data, economist's quote)

* Firms prices to rise 0.9 pct a year from now - BOJ

* No change to firms' forecasts 3, 5 years ahead - BOJ

* Inflation expectations key to BOJ's stimulus programme success

* BOJ will scrutinise survey at policy meeting

TOKYO, July 3 (Reuters) - Corporate Japan expects only a slight acceleration in inflation in a year and barely any change in the next three to five years, a central bank survey showed on Tuesday, highlighting the difficulties the bank faces in hitting its price target.

Companies surveyed by the Bank of Japan expect consumer prices to have risen 0.9 percent a year from now, slightly above their projection of 0.8 percent three months ago.

Firms also expect consumer prices to have risen by an annual 1.1 percent three years from now and 1.1 percent five years ahead, also unchanged from three months ago.

"The BOJ will try to explain why inflation is not picking up when it next meets, but the reality is wages are not rising much and some people are not confident in the outlook," said Shuji Tonouchi, senior market economist at Mitsubishi UFJ Morgan Stanley Securities.

"This means the BOJ will keep policy on hold for now."

The BOJ will conduct a quarterly review of its projections at the meeting on July 31 and will examine whether or not recent weakness in consumer prices is temporary.

The BOJ deployed a massive stimulus programme in 2013 in the hope of shocking consumers out of their deflationary mindset and boosting corporate and household inflation expectations.

After failing to make much headway on price growth, the BOJ revamped its policy framework in 2016 to one better suited to a long-term battle against deflation, although its results have been modest.

The nationwide core consumer price index, which includes oil products but excludes volatile fresh food costs, rose a modest 0.7 percent in May from a year earlier, stoking fears that inflationary pressure is not increasing.

The BOJ survey on corporate price expectations comes one day after the tankan showed business confidence among big manufacturers worsened for a second straight quarter as U.S. trade protectionism clouds the outlook while oil and other materials drive up input costs. (Reporting by Stanley White; Editing by Sam Holmes)