TOKYO (AFX-ASIA) - State Minister for Economic and Fiscal Policy Heizo Takenaka said he does not think the government needs to compile a second supplementary budget after the downgrade of its full year GDP forecast. "I don't think it is necessary for now because Japan is not yet falling into a deflationary spiral," he told a regular press briefing after this morning's growth downgrade, though he added that he is worried over the deflation trend. "There are many economists voicing concern about Japan falling into a deflationary spiral and I agree with this concern," Takenaka said. However, he added: "Private consumption is still supporting the economy. I don't think the economy is falling into a deflationary spiral at the moment." Takenaka said the economy may continue to shrink through the next fiscal year, depending on the US economy, adding that Japan must carry out structural reform to lessen its dependence on overseas developments. "Currently, the global economy has a structure that depends highly on the US economy. It is necessary to create a structure through reform that can reduce the damage (to Japan) from outside factors," he said. The shrinking of the Japanese economy may mark a correction period before further growth, he said, declining to comment on the Cabinet Office's monthly assessment but noting that the economic situation is becoming severe. The Nihon Keizai newspaper reported this morning that the Cabinet Office plans to downgrade its economic assessment for the first time in three months, asserting that "the economy is deteriorating further."