Finance Minister Masajuro Shiokawa said Tuesday that he will strive to carry out the two-step approach to fiscal reform unveiled this week by Prime Minister Junichiro Koizumi, although he ruled out an immediate shift to belt-tightening policies that could hurt the fragile economy.

"I will strive to observe the 30 trillion yen annual limit on new government bond issuance, which symbolizes the beginning of new structural reform," Shiokawa told a regular news conference.

"It is inappropriate, however, to compile a contractional budget, because the most important task now is to achieve an economic recovery," he said.

In his first policy speech to the Diet, Koizumi said Monday that he would try to improve the nation's debt-ridden public finances in two stages.

He specified keeping new debt issuance below 30 trillion yen during fiscal 2002 as the first phase of the plan.

The second phase, according to the prime minister, will see the government striving to achieve the so-called primary balance, in which expenditures excluding debt servicing do not exceed revenues, excluding bond issues.

Koizumi did not delineate a time frame for this latter stage.

Shiokawa said the government cannot enter the second phase in the near future in light of the current economic situation, suggesting it will be difficult to cut expenditures or raise taxes for now.

Instead, Shiokawa stressed the importance of reviewing the balance among various sources of government expenditure, including reducing dormant public works projects and shifting more resources to new areas, which would stimulate private sector demand and lead to an increase in tax revenues.

During a separate news conference, Heizo Takenaka, state minister in charge of economic and fiscal policy, said timing would be important in tackling fiscal reform.

"We should decide when the economic environment warrants it, such as when the economy gets back on its own growth path," Takenaka told reporters.

"It is not appropriate to specify the exact timing at this moment," he said.