TOKYO (Kyodo) -- Bank of Japan Governor Kazuo Ueda said Wednesday that the central bank will raise rates if the economy keeps improving, emphasizing that it will closely monitor if the country's wage growth continues into next year.

"The degree (of monetary accommodation) may become excessive if the bank maintains the current low level of the policy interest rate even as economic activity and prices improve," Ueda said in a speech at an event hosted by the Japan Business Federation, the country's biggest business lobby.

Raising rates according to the degree of improvement in the economy is extremely important so the bank can avoid being forced to hike them rapidly at a later time to contain inflation, he said.

The remarks came about a week after the BOJ kept its rates at around 0.25 percent at its latest policy meeting in a move widely expected by market players, with Ueda citing uncertainties over the wage trend at home and the outlook for U.S. economy under incoming President Donald Trump.

In his speech, Ueda said the bank is particularly interested in whether smaller firms can keep up with the current wage hike momentum at next spring's wage negotiations.

"Corporate profits have been at high levels, particularly for large firms," he said. "To sustain the virtuous cycle, it is essential that these profits be fairly distributed to small and medium-sized firms and eventually to households."

Prime Minister Shigeru Ishiba, who also made a speech at the event attended by many corporate leaders, called on them to increase pay and pass on higher costs to prices to ensure the country moves completely out of deflation.

While acknowledging that 2024 has been "a year of steady progress" toward achieving the bank's price stability target, Ueda predicted that in 2025 "the virtuous cycle will further intensify and that Japan's economy will move closer to sustainable and stable 2 percent inflation, accompanied by wage increases."