OSAKA -- The Osaka Prefectural Government announced Friday a 3.5 trillion yen budget plan for fiscal 1998, in which financial support for elderly people is to be reduced from August.

The 3.5 trillion yen represents a 6.1 percent increase over the figure for the current fiscal year, the prefecture said. The prefecture has provided financial assistance for medical care for residents over 65 years old. The assistance is considered the most generous nationwide. However, it will limit the recipients to those over 65 years old in lower income households, starting in August.

The prefecture is facing a serious financial crisis after the bubble economy came to an end. Its fiscal 1998 budget consists of a 2.87 trillion yen general account budget and a 600 billion yen special account budget. Although the consumption tax, which was hiked to 5 percent from 3 percent last April, will bring in an estimated 294 billion yen, up 203.6 percent from the previous year, the prefecture is expected to lose 100 billion yen in revenues from corporate and other taxes.

Included in the reduced expenditures will be a 20 percent cut in construction work spending from the previous year's budget, pegging it to 98 billion yen. "It was very difficult to draw up the 1998 budget plan. We cut appropriations for most sections," Osaka Gov. "Knock" Yokoyama said. "Although we will change the financial support for the elderly, we will take other measures to help aged residents of local communities."