The Cabinet on Thursday approved the final version of an austere 77.67 trillion yen general account budget for fiscal 1998, up only 0.4 percent from the initial budget for the current fiscal year.

The general expenditures portion of the budget -- spending related to policy implementation -- was reduced by 1.3 percent to 44.54 trillion yen, marking the first decrease in 11 years.

The budget also features the first year-on-year reduction in spending on official development assistance. Roughly 2 billion yen to help prepare for the relocation of the U.S. military's Futenma Air Station in Okinawa was not included in the budget as an individual item. Instead, the outlays, which will cover such projects as environmental feasibility surveys, will come from the fiscal 1998 budget's reserve funds if and when needed.

The Finance Ministry took painstaking efforts to keep the budget in line with the government's fiscal reconsolidation targets, opting to place the bulk of various pump-priming expenditures into a supplementary budget for the current fiscal year. The final budget basically follows the lines of a draft drawn up by the Finance Ministry last Saturday, with additional spending such as 4 billion yen to start construction on a new international airport for the Chubu region included after four days of extra negotiations with individual ministries and agencies.

Finance Minister Hiroshi Mitsuzuka cited the importance of taking the first step in efforts toward fiscal reconsolidation in the fiscal 1998 budget, but he stressed that the fiscal situation is still serious. "I believe we have plotted the course toward our fiscal reconsolidation goals, and we will continue capping budget spending (in upcoming fiscal years) as stipulated by the Fiscal Structure Reform Law" to whittle down the deficit, he said. The belt-tightening began during the summer, when the ministry slapped request caps on key outlay areas to keep general expenditures flat on a year-on-year basis, and the general mood to reduce spending led to little bickering over reviving budget requests as traditionally is the case.

But because revenue from taxes and other sources is not expected to be enough to cover all expenditures, the government will be forced to issue 15.56 trillion yen in government bonds, 7.13 trillion yen of which will be in the form of deficit-covering bonds. Although the bond issue figure is down 6.9 percent from the initial fiscal 1997 budget, the outstanding issue of government bonds as of the end of fiscal 1998 is expected to rise to a record 279 trillion yen, indicating further deterioration of the nation's fiscal situation.

About 20 percent of expenditures in the fiscal 1998 budget will be financed through bond issues. Allocations related to the transfer of Futenma to an offshore heliport in another part of Okinawa was left unresolved until separate meetings Wednesday evening between Prime Minister Ryutaro Hashimoto, Okinawa Gov. Masahide Ota and Tetsuya Higa, mayor of Nago, where the heliport is to be located.