By Tetsushi Kajimoto


TOKYO (Reuters) - Japanese Prime Minister Shinzo Abe said on Wednesday that the top priority for his reshuffled cabinet was the economy and that he would do his utmost to lift the country out of deflation.


Abe kept most top posts unchanged in the limited cabinet reshuffle that followed his cabinet's approval on Tuesday of 13.5 trillion yen ($133.25 billion) in fiscal steps to try to revive the economy mired in more than 15 years of deflation.


"The utmost priority is the economy," Abe told a news conference.


"While facing up to risks posed by the global economy, we'll use all policy tools to accelerate the escape velocity out of deflation to the maximum.


The government and the Bank of Japan would work together to defeat deflation, Abe said, adding that he believed the central bank would take firm policy steps to achieve its 2 percent inflation target.

"Specific policy steps should be left up to the BOJ to decide. I trust Governor (Haruhiko) Kuroda's ability," he added.

The premier said labor market reform was "the biggest challenge", referring to structural reforms in his broader, three-pronged strategy to reinvigorate the moribund economy.

Abe pledged on Wednesday to map out a implementation plan on the way for people to work by the end of current fiscal year to March 2017.

Three years of reflationary monetary, fiscal and reform policies dubbed "Abenomics" have done little to revive the world's third-largest economy, and financial markets are growing worried that the Bank of Japan is running out of ammunition.

The BOJ disappointed markets on Friday by keeping bond purchases steady, defying expectations it would hoover up more, and made traders even more nervous after announcing it would re-evaluate policies in September.

On Tuesday, Kuroda declined to comment on a recent spike in government bond yields but said the planned review will not lead the BOJ to weaken its stimulus.

Tokyo stocks have also sold off on concerns that the latest fiscal stimulus package does not contain enough new and direct spending and is spread over several years, diluting its economic impact.

(Additional reporting by William Mallard and Elaine Lies; Editing by Kim Coghill)