Japan's Prime Minister Kishida Fumio has asked business leaders to raise wages to strengthen the country's economy.

Kishida reiterated his call for pay hikes at a New Year's event held by three major business groups on Thursday.

The prime minister said the economy is at a fork in the road.

He said some experts warn that if wage increases are outpaced by inflation as seen in the United States and Europe, Japan will fall into stagflation, or rising prices combined with slowing of the economy.

He also said other experts predict that Japan could have a chance in several decades to change the entire character of its economy, cashing in on a rebound in demand following the economic fallout of the coronavirus crisis.

Kishida said that what the two views have in common is the belief that the outlook for Japan's economy largely depends on outcomes of this year's wage negotiations.

He urged company executives to raise wages.

Kishida also vowed to promote work reform measures and expand programs to support them as part of efforts to reverse Japan's low birthrate.

He said the number of working women in Japan has increased, but that a childcare leave program must still be enhanced. He asked for cooperation by business leaders to this end.