TOKYO, Aug 29 (Reuters) - Japan may be at an inflection point in its 25-year battle with deflation as price and wage rises show signs of broadening, the government said on Tuesday, signalling its conviction the economy was nearing an end to prolonged stagnation.

The optimistic view echoes that of the Bank of Japan (BOJ), which has said corporate price- and wage-setting behaviour was changing, and could pave the way for phasing out the country’s massive fiscal and monetary support.

“We shouldn’t dismiss the fact a window of opportunity may be opening to exit deflation,” as inflation perks up and public perceptions about persistent price declines abate, it said.

The change in tone on deflation risks underscore the government’s shifting priorities, as rising commodity costs and a tightening job market push up inflation and heighten public worries over higher living expenses.

Japan’s core inflation hit a four-decade high of 4.2% in January and remained above the BOJ’s 2% target for 16 straight months in July, as more firms pass on higher raw material costs.

“We need to eradicate the sticky deflationary mindset besetting households and companies,” the report said, adding the government must work closely with the BOJ to achieve sustained wage growth.

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