* Kaieda says he personally thinks economy already in lull
* Fiscal discipline not sole focus -Kaieda
(Adds more quotes, background)
By Rie Ishiguro
TOKYO, Sept 24 (Reuters) - Japanese Economics Minister Banri Kaieda said on Friday that a row with China over disputed islands that has affected bilateral trade poses a downside risk to the Japanese economy.
"I recognise that brakes have been applied on trade with China and on tourism ... The Japanese economy's future performance seems to depend on whether the problem is solved quickly," Kaieda told a news conference after a cabinet meeting.
He added that tension with China is hampering the government's policy of taking advantage of strong domestic consumption in emerging Asian economies.
Japan and China are locked in an increasingly heated dispute triggered by Japan's detention of a Chinese fishing boat captain whose trawler collided earlier this month with a Japanese patrol boat in waters near islands both sides claim.
A Japanese foreign ministry spokesman confirmed on Friday that four Japanese nationals had been detained in China on suspicion of violating Chinese law regarding the protection of military facilities.
Kaieda said that he personally thinks that the Japanese economy has entered a lull and is aiming to compile a supplementary budget as early as possible, though the size of this is subject to future discussions.
"My focus is not solely on fiscal discipline ... I have set my focus on supporting the economy's recovery and escaping deflation," he said.
On financing the supplementary budget, Kaieda said the government needs to tap its tax and non-tax revenues before considering issuing new bonds. (Editing by Joseph Radford)