)- Japanese policy makers need to be careful when monitoring deflation as the economy could swing to inflation, which could harm growth, Japanese Economy and Banking Minister Kaoru Yosano said Tuesday. "We use the word 'deflation' a lot, but we must be careful about our thinking because deflation can easily become inflation," Yosano told reporters at a briefing. "We have to look at the whole economy and not just prices to judge whether we've escaped deflation," he said. Earlier Tuesday the Cabinet Office upgraded its outlook for consumer prices for the first time in three months, according to its monthly economic report for June, as prices have entered a mild upward trend. The government stopped short of declaring an end to deflation in its report for June. Many government officials have avoided saying deflation is over as that could lead to higher interest rates, which would in turn inflate government debt servicing costs. However, Yosano's comments Tuesday seemed intended to suggest there are dangers associated with the government's insistence that the economy is still mired in deflation. Yosano also said that a recent selloff in Japanese stocks will have no significant impact on the Japanese economy. "These falls pose no risk of an economic slowdown," he said. "The fallout from this will be very limited." Japanese stocks logged their largest one-day fall in 4 1/2 years Tuesday amid concerns that U.S. price data this week could show mounting inflationary pressures. The benchmark Nikkei 225 Stock Average fell 614.41 points, or 4.1%, to 14218.60 - the index's largest point fall since a 682.85 point decline the day after terrorist attacks in the U.S. on Sept. 11, 2001. Yosano said Japanese stocks rose steadily last year and are now in an adjustment period. He said Japanese share price declines also reflect external factors such as growing investor uncertainty. HHowever, Japanese stocks will reflect the underlying economy in the long run, which is a positive, given Japanese corporate earnings are solid and capital expenditure is strong, he said.