TOKYO (AFX-ASIA) - Heizo Takenaka, State Sinister of Economic and Ficsal Policy, said the government is now determined to compile a full timetable for reform action in late September to deal with the increasingly severe conditions seen in the Japanese economy. Takenaka, speaking after the second quarter GDP figures, also said the government will introduce emergency and preliminary action plans which form part of a broader structural reform policy in mid- to late-October. The decision came after the Prime Minister Junichiro Koizumi instructed the economic ministers, including Takenaka and the Finance Minister Masajuro Shiokawa, to speed up the process of structural reforms so as to prevent Japan from slipping into a deflationary spiral. The prime minister told the cabinet to "strictly prohibit" increased public works spending when compiling the emergency and to put the focus on new job and business creation, Takenaka said. Koizumi also stressed the need to establish a safety net for those workers who may lose their jobs as a result of structural reforms while keeping the commitment to cap the annual issuance of government bonds at 30 trln yen. "We will make a timetable and preliminary action plans that are understandable to the public," Takenaka said. Takenaka said that while respecting the 30 trln yen cap on JGB issues as much as possible, the government may "ease" such rules, "boldly and flexibly, should the risk that the Japanese economy fall into a deflation spiral emerge." The minister, however, said that the government may allow the Japanese economy to experience a GDP contraction, as long as it is "minor," as, under severe fiscal conditions, it is not possible to embark on large government spending just to achieve small growth rates. "We will no longer conduct a fine-tuning type fiscal policy but will manage it in a more stable manner from a longer-term viewpoint and make a better use of built-in-stabiliser functions, which we call a reform of fiscal policy," the minister added. "But, I, the prime minister and the finance minister share the same commitment to avoid the economy from falling into deflation spiral." Takenaka also said he, "personally," wants to identify growing deflation as a key challenge that needs to be addressed by the whole government, rather than just an issue to be handled by the Bank of Japan. "But, of course, since this is a highly monetary matter, it is important to be addressed also by monetary policy," he said. Takenaka said that Japan did fairly well in the second quarter, especially relative to the sharp slowdown in economic activity in the US. "I had prepared for worse numbers ... but it (the economy) did well thanks to the solidness of consumer spending.... which implies Japan still has underlying economic strength," he said. The minister, however, said any optimism should be ruled out, adding that even if the GDP figures were not so bad as had been thought, "it reminded me of the severity of the condition of the economy, which was seen in corporate activity, and I refreshed my pledge to press forward with structural reform." Takenaka said Japan may miss the year to March 2002 GDP growth target of 1.7 pct GDP and may review the feasibility of this target during discussions on the supplementary budget.