James Michener will use Canadian royalties from ``Journey,'' his first novel about Canada, to establish a fund for promoting the nation's fiction writers and their work, his publisher said Thursday. Judy Brunsek of McClelland and Stewart said ``Journey,'' just arriving in bookstores, should earn $164,000 in royalties the first year. A $8,200 prize will be awarded annually to a piece of Canadian short fiction selected from about 25 to 30 small literary journals across the country. It and others chosen by a literary jury will be published as a volume each year, with the first scheduled for 1989. In an interview with the Toronto Star, Michener was quoted as saying he felt it improper to ``barge in here and publish a book and take royalties out of the country.'' ``Journey'' is set in the Klondike in 1897-99, during the gold rush, and tells of four Englishmen and an Irishman who travel to the Canadian Northwest. Ms. Brunsek said the 220-page book began as part of ``Alaska,'' one of Michener's sprawling bestsellers, but was cut to bring the length down to 868 pages. ``He gets attached to his characters and decided he had read enough to perhaps expand it,'' she said in a telephone interview. ``Because it was set in Canada, he felt very strongly about getting published in Canada.'' ``He called us one day,'' she said, laughing. ``We couldn't quite believe it. ... We of course jumped at the chance.'' Plans are for ``Journey'' to be published in the United States next year by Random House, the author's American publisher. U.S. royalties will not be affected by the Canadian arrangement. The 81-year-old author agreed to the plans for a short-fiction prize during a promotional visit to Toronto earlier this week. He and Pierre Berton, whose popular histories of northern Canada figured in the research for ``Alaska,'' made a joint appearance Monday night. Michener was quoted by the Star as saying he was ``caught up'' by the story of the five men in the portion cut from ``Alaska'' and ``became intensely interested in what would have happened to them.'' He said his next long novel will be about the Caribbean and probably will be published in 1990.