The government said in its annual report on the economy Tuesday that the end of deflation is in sight and pressured the Bank of Japan to carry out future interest rate rises in a wise manner.
"Future increases in interest rates need to be implemented prudently, with their impact on each economic sector taken into account," the Cabinet Office said in the Annual Report on the Japanese Economy and Public Finance 2006.
The central bank raised the key short-term interest rate to 0.25 percent from virtually zero last Friday, marking Japan's first rate hike in six years and its return to normal monetary policy.