By Makiko Yamazaki

(Reuters) - Japan's government will compile an extra budget of some 3 trillion yen ($19 ‌billion), Prime Minister Sanae Takaichi said on Monday, stoking ‌concerns over fiscal expansion that could further strain the country's already-stretched finances.

The extra ​budget comes as the government decided to use roughly half of its 1 trillion yen contingency reserves to fund subsidies aimed at curbing utility bills, increasing the need to replenish reserves amid the ‌risk of a prolonged ⁠Middle East crisis.

Japan has also been extending separate subsidies to keep gasoline prices steady, a costly ⁠step that is quickly using up its contingency reserves as oil prices remain elevated.

Takaichi said the extra budget will be financed by ​new deficit-financing ​bonds, but added the measure ​could be implemented without affecting ‌the bond market.

The calendar-based issuance of government bonds will remain unchanged from the original plan, as stronger tax revenues, non-tax income and expected underspending are likely to eliminate the need for around 3 trillion yen in deficit bonds that had been scheduled ‌for issuance through June, she said.

The ​plan, first reported earlier this month, ​marks a reversal from ​her previous remarks ruling out the need for ‌an additional budget.

A subsequent Reuters report ​that the government ​is likely to issue fresh debt as part of funding for the extra budget helped drive the yield on ​the benchmark 10-year ‌Japanese government bond (JGB) to 2.8% last week, its highest since ​October 1996.

($1 = 158.9300 yen)

(Reporting by Makiko Yamazaki; Editing by ​Alison Williams and David Holmes)

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