Japan's economy is making steady progress towards getting rid of the years-old problem of `deflation' as the economic improvement continued to gain momentum, Prime Minister Shinzo Abe said on Tuesday.

Mr. Abe was addressing a group of ministers after the government dropped the word deflation from its monthly economic report for the first time since November 2009.

The world's second-biggest economy has dropped the word deflation from its economic report after seeing signs of pick up in consumer prices. The dropping of the word deflation is a strong hint that the government battle against deflation has started showing positive results.

However, the Cabinet Office underlined that taking the word deflation out of its monthly assessment did not mean that the government's battle against declining prices was over.

A senior official from the Cabinet Office said, "Prices are holding firm and the situation is not deflationary, but that doesn't mean we have exited deflation."

The government had included the word deflation in its assessment in November 2009 following persistent price falls in wake of the 2008 global financial crisis. The word deflation first appeared in Japanese government's monthly report in 2001.