A top International Monetary Fund official urged Japan on Monday to prepare a supplementary state budget to prevent the nation’s economy from worsening later this year.

Stanley Fischer, IMF deputy managing director, suggested to Finance Minister Kiichi Miyazawa during a Tokyo meeting that forming an extra budget early would remove uncertainties about the Japanese economy, a ministry official said.

Miyazawa disagreed, however, reiterating that Japan should wait for the September release of gross domestic product data for the April-June quarter before deciding if an auxiliary budget, to supplement the 85 trillion yen fiscal 2000 budget, is necessary, the official said.

Fischer was quoted as saying that although the nation is saddled with huge debts, the absence of both inflation and a current account deficit would allow downside risks to the economy to be met by further spending.

Miyazawa responded that the government’s fiscal health can affect consumer confidence, adding that the stimulus effects of public investment are debatable, according to the official.

Fischer is in Japan through today on a regular IMF mission to discuss economic situations with the authorities of member countries.