TOKYO: Japanese economics ministers hinted yesterday they may consider an extra budget for the current fiscal year if key data due in the autumn show a worsening of the recession-threatened economy.

Having pledged to prevent a contraction for the year through next March, the government appears to have little choice but to splash out on fiscal stimulus after its data showed the economy shrank 0.2 per cent in the January-March quarter.

Economists have widely predicted a further downturn in the three months to June.

Prime Minister Junichiro Koizumi said in an interview with domestic media on Monday the government would look at April-June gross domestic product and other data in the autumn before deciding whether to push ahead with an extra budget.

But the reform-minded Koizumi and his ministers were quick to add that fiscal stimulus measures should not be taken for granted.

Previous administrations have been quick to ease the pain of worsening economic conditions through massive pump-priming, resulting in Japan having the largest debt and largest annual deficit among major industrialized nations.

Finance Minister Masajuro Shiokawa told a news conference yesterday that discussions for an extra budget could be held after a key Bank of Japan (BOJ) "tankan" corporate sentiment survey in September and other economic data.

With such data, the government "would seek to compile an economic forecast for the year through next March and discussions (for an extra budget) would come after that," he said.

Economics Minister Heizo Takenaka concurred, saying: "I also think we should decide after we look at the economic indicators released from summer to autumn."

Takenaka said a contraction would put Japan's economy, the world's second-biggest, at risk of a deflationary spiral.

But Shiokawa emphasized that the government was not thinking of compiling an extra budget now and that such a move should not be considered a matter of course.

He also said he wanted the Council on Economic and Fiscal Policy, a key government panel headed by Koizumi, to discuss whether an extra budget was needed.

The government is also likely to keep pressing the central bank to further ease its already hyper-loose monetary policy in order to alleviate deflationary pressure.

Takenaka said he planned to attend the BOJ's policy-setting meeting later this week but added he did not intend to make any specific policy requests.

Agencies via Xinhua