The government hopes to slash public works spending by 10 percent in fiscal 2002 and abolish the system of earmarking certain tax revenues for the construction and maintenance of the nation's road system, outlining the strategy in a basic policy plan for the fiscal 2002 budget.

The policy draft, prepared in line with Prime Minister Junichiro Koizumi's budgetary reform initiative, said the government plans to "overhaul the current arrangements for setting aside certain tax revenues exclusively for road construction."

Government sources said the proposal is expected to be adopted by the Council on Economic and Fiscal Policy on Friday. The council is chaired by Koizumi.

The overhaul will include "considering using the automobile weight tax revenues for purposes other than road construction," the draft said.

The automobile weight tax and the gasoline tax are presently collected specifically to pay for highway and road construction.

The prime minister and the Finance Ministry are calling for wider use of the tax revenues now earmarked specifically for road construction as part of the administration's budgetary reforms.

However, the Land, Infrastructure and Transport Ministry and some senior Liberal Democratic Party politicians with close ties to the construction industry strongly oppose the move.

The draft policy also includes a review of highway construction plans that have already been approved by the government.

A 10 percent cut in the public work projects would translate to 350 billion yen less being spent on roads.

The draft also said that road projects promoted by four major government-backed highway authorities will be "strictly reviewed in light of the spirit of proposed reforms of the entities."

Koizumi and his two coalition partners agreed Thursday to dismantle or privatize seven major state-backed institutions as part of the prime minister's administrative reform drive to cut government spending, including the four groups -- Japan Highway Public Corp., Metropolitan Expressway Public Corp., Hanshin Expressway Public Corp. and the Honshu-Shikoku Bridge Authority.

Japan Highway has requested a 5.3 trillion yen budget in fiscal 2002 for the construction of 152 km of toll roads across the country.

The transport ministry has vowed to fight for the highway construction budget, arguing that road projects already under construction cannot simply be abandoned.

The transport ministry is also fighting for budget allocations for the Honshu-Shikoku Bridge Authority, which has 3.845 trillion yen in interest-bearing loans.