By Teruaki Ueno
TOKYO, Feb 15 - Two days before welcoming U.S. President George W. Bush to Tokyo, Japanese Prime Minister Junichiro Koizumi vowed on Friday to do whatever it takes to combat deflation and revive the world's second-biggest economy.
Speaking to foreign journalists at his official residence, Koizumi voiced support for Bush's "war against terrorism" and his inclusion of North Korea along with Iraq and Iran among pariah states in an "axis of evil".
Bush arrives in Tokyo on Sunday on a three-day visit as part of a tour that will also take him to South Korea and China.
The leaders are to meet on Monday for the fifth time since Koizumi took office last April, vaulted to power by voters' support for his agenda to breathe new life into the ailing economy.
Japanese officials are scrambling to craft a package of steps to fight deflation and repair the banks and Koizumi plans to outline the key points to Bush during their talks.
"We will keep a careful watch on the current economic situation and we will take decisive steps, if necessary, to prevent financial unrest and halt the deflationary spiral," Koizumi said.

U.S. PRESSURE He was at pains to shrug off worries that a sudden drop in public support for his cabinet could undermine his promise to forge ahead with painful economic reforms.
"My structural reforms are achieving steady progress...The decline in the approval ratings will not affect my structural reforms," he said. "Compared to previous cabinets, the approval rating for my cabinet is still high."
A poll conducted this week by the Nihon Keizai Shimbun daily showed about 60 percent of voters now believe that Koizumi cannot fulfil his mandate. Just 33 percent think he can.
Most media surveys have suggested that the sacking late last month of controversial but popular Foreign Minister Makiko Tanaka put a big dent in Koizumi's popularity.
A survey by Jiji news agency released on Friday showed public support for his cabinet tumbling 21.3 percentage points from January to 46.5 percent this month, the biggest drop since its opinion poll began in 1960.
Japan has come under fire from U.S manufacturers as well as its Asian neighbours for appearing to engineer a fall in the value of the yen so it can export its way out of trouble rather than knuckle down to economic reforms.
The shaky state of Japan's banking system has become a major point of concern in financial markets ahead of the end of the financial year on March 31 and the start of a process to scrap a full state guarantee on bank deposits from April 1.
Koizumi said on Friday that he would forge ahead with measures to accelerate the disposal of banks' bad loans.
He voiced hopes that his reforms would bear fruit within a year or two, pulling the economy out of its prolonged depression.
"I believe temporary low growth is something we have to put up with in the interests of structural reforms," he said. BACKING OVER NORTH KOREA Stressing that Japan is a key U.S. ally, Koizumi expressed support for Bush for lumping North Korea with Iraq and Iran in an "axis of evil". "His expression of an 'axis of evil' shows his strong resolve to fight against terrorism," Koizumi said. "President Bush is taking a tough stance towards North Korea. But I don't think he has shut the door for dialogue with North Korea," he added. North Korea has said Bush's words were tantamount to a declaration of war and has responded with a harsh words of its own, with its official KCNA news agency describing the United States as the "empire of the devil". U.S. national security adviser Condoleezza Rice said on Thursday Washington remained interested in a dialogue with North Korea, but she said: "We want dialogue on some specific issues. We don't want dialogue for