Finance Minister Masajuro Shiokawa indicated Friday that the ceiling on fiscal 2002 budget requests by ministries and agencies will be lower than the current year's level.
While saying ministries and agencies need to conduct a comprehensive review of their administrative costs, Shiokawa told a news conference that such efforts "would lead to a minus ceiling."
"I do not like to approve requests that are made simply by taking into account the appropriation for the previous year," Shiokawa said.
He also expressed hope that each ministry and agency will voluntarily cut its requests.
A cutback on the ceiling is needed to achieve Prime Minister Junichiro Koizumi's plan to keep the annual issuance of new government bonds under 30 trillion yen.
The Finance Ministry plans to work out the ceiling by mid-August.
The government usually sets a ceiling on budget requests before the Finance Ministry finishes receiving them at the end of August.
Shiokawa also said the economy is in a severe situation, although its fundamentals remain strong -- exports have not fallen sharply and savings rates are increasing.
A recent survey shows that major companies are becoming increasingly pessimistic about the state of the economy, with more giving the April-June quarter a negative assessment.