Thursday's announcement of modest economic growth in the April-June quarter has paved the way for the state to prepare more spending measures to prop up the economy.

First, the government wants to decide how to allocate the 500 billion yen reserve budget set aside for this fiscal year by the end of September, Prime Minister Keizo Obuchi said.

Obuchi is expected to issue the necessary orders at a Cabinet meeting today, following a suggestion made Thursday by Finance Minister Kiichi Miyazawa.

The reserve fund, set aside for unspecified public works projects, is expected to be used for megaprojects like the construction of new shinkansen lines.

In addition, Obuchi said the government will prepare a supplementary budget -- if he is re-elected president of the ruling Liberal Democratic Party on Sept. 21.

Miyazawa said the supplementary budget -- the second for fiscal 1999 -- will be submitted to the Diet by late November.

In response to the positive GDP data, Economic Planning Agency chief Taichi Sakaiya stressed the need for "cautious and sufficient" economic stimulus measures to ensure the recovery does not fail halfway. As many private-sector economists have pointed out, Sakaiya warned that public works will run out of steam early next year and the gap must be filled.

The size of the supplementary budget is not official yet, but some economic ministers and private economists have called for a package of several trillion yen.

Even though the GDP data are better than expected, Sakaiya said he is not going to retract an earlier remark that the next supplementary budget would require 4 trillion yen to 5 trillion yen in real spending. Spending in the January-March and April-June quarters next year must match the level of the previous year, he said.

In preparatory negotiations for a tripartite coalition, the LDP and New Komeito agreed last week to emphasize telecommunications networks and urban antidisaster measures in the supplementary budget.

Public focus will be on whether the budget includes much of the conventional projects, often criticized as inefficient and harmful to industrial structural reform.

The 520 billion yen first supplementary budget in fiscal 1999, enacted in July, was centered on job-creation measures to curb record-high unemployment.