Feb. 23 (Bloomberg) -- Japan will monitor prices of iron ore because increasing costs of the material may hurt the country's steel production, Chief Cabinet Secretary Hiroyuki Hosoda said.

Hosoda, the chief government spokesman, made the remarks at a regular news conference in Tokyo after Japanese steelmakers yesterday said they agreed to pay more for iron ore.

Nippon Steel Corp. and JEF Holdings Inc. said they will pay Brazil's Cia. Vale do Rio Doce 71.5 percent more for iron ore starting April 1.

``I believe that's something we need to pay attention to,'' Hosoda said. ``That would significantly raise production costs in the steel industry.''

To contact the reporters for this story: Keiichi Yamamura at kyamamura@bloomberg.net

Last Updated: February 22, 2005 21:53 EST