Japanese Prime Minister Fumio Kishida on Tuesday described the Bank of Japan's overhaul of its unorthodox monetary easing framework designed to end deflation as "appropriate," promising to keep working with the BOJ to stabilize prices.

The central bank's policy shift "has stepped into a new phase to generate positive economic outcomes" while "maintaining an accommodative environment," Kishida told reporters at his office after meeting with BOJ Governor Kazuo Ueda.

Kishida also quoted Ueda as saying during their talks that the BOJ is confident about the prospect of its 2 percent inflation target being achieved stably and sustainably and that drastic monetary easing is now over.

Japanese Prime Minister Fumio Kishida speaks to reporters at the premier's office in Tokyo on March 19, 2024. (Kyodo)

Earlier in the day, the BOJ scrapped its negative interest rate policy in its first rate hike in 17 years and decided at its two-day meeting to guide short-term interest rates within a range of zero and 0.1 percent.

Asked whether the government would declare an official end to Japan's decades-long deflation in the near future, Kishida said it would "make a comprehensive judgement" while assessing various economic indicators, including the consumer price index.

At a press conference on Tuesday, Japanese Chief Cabinet Secretary Yoshimasa Hayashi said, "We hope that the BOJ will continue to closely communicate with the government and manage monetary policy in an appropriate manner."

Hayashi also said the government will maintain a 2013 joint accord with the BOJ that commits the two sides to working together to overcome deflation, saying its policy shift is an "extension" of their pledge.

Regarding the possible risk of increased interest payments as a result of higher yields, which may have negative effects on Japan's fiscal health, Hayashi said the government will promote efforts to improve fiscal soundness by streamlining expenditures.

The BOJ's move came after the Japanese Trade Union Confederation said in a preliminary survey that domestic companies agreed to a wage expansion averaging 5.28 percent at this year's negotiations with labor unions, the sharpest rise in more than 30 years.

The focus has turned to whether Kishida's government can implement economic policies to realize wage growth exceeding price hikes, as consumer sentiment has shown little signs of significant recovery with households becoming reluctant to spend.

Japanese Chief Cabinet Secretary Yoshimasa Hayashi holds a press conference at the prime minister's office in Tokyo on March 19, 2024. (Kyodo) ==Kyodo

Japan's real wages, adjusted for inflation, in January were down 0.6 percent from a year earlier, marking the 22nd straight month of decline, as salary gains continued to fall short of price rises, official data showed.

In 2023, Japan's core consumer prices, excluding volatile fresh food items, surged 3.1 percent, registering the fastest climb in 41 years, while the country's economy edged up by an annualized rate of 0.4 percent in the October-December quarter.

Kishida's government is planning to take measures to prompt smaller firms to raise wages for their employees and to carry out tax cuts later this year to shore up disposable income among consumers.

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