Prime Minister Yoshiro Mori said Sunday he has ordered government officials to get ready to compile a supplementary budget for fiscal 2000 in case the economy starts to fizzle.
In a program on TV Asahi, Mori said he believes public works projects are an effective means of stimulating the economy.
The government will draw on the its 500 billion yen public works reserve for fiscal 2000 after the June 25 House of Representatives election is over, he said.
The prime minister also said the government will not depart from its expansionary policies to reconstruct the state's debt-ridden finances until the economy is firmly on a recovery path.
However, he said the government is planning to embark on fiscal reforms in fiscal 2001, when the economy is expected to grow by around 2 percent.
New Komeito party leader Takenori Kanzaki said on the same program that a supplementary budget will be indispensable if the gross domestic product for the April-June quarter dives from the previous quarter.
Japan's GDP grew a real 2.4 percent in the January-March quarter from the previous period, enabling the Japanese economy to expand a real 0.5 percent in fiscal 1999 ended March 31, its first growth in three years.
Finance Minister Kiichi Miyazawa has said that the 500 billion yen in reserves should be used to shore up the economy soon after the general election, bolstering the ruling coalition's joint campaign pledge.