Finance Minister Masajuro Shiokawa said Friday he hopes to reduce subsidies to local government public works projects in an effort to streamline the state budget.

"The subsidies should be reviewed," Shiokawa told a regular news conference, adding the review is aimed at encouraging local governments to reduce spending.

The cost of public works can be reduced by measures that include reviewing unit costs and the way the contracts are concluded, Shiokawa said.

But the finance minister said the review should be promoted cautiously because there may be some cases where local governments cannot finance projects.

Shiokawa said the government must show its determination to achieve the goals of its draft guidelines on economic and fiscal policies unveiled Thursday in compiling the fiscal 2002 budget.

"The most important issue is the compilation of the fiscal 2002 budget," Shiokawa said. "Achieving budget reform is a prerequisite for other reform items."

Members of the Council on Economic and Fiscal Policy, headed by Prime Minister Junichiro Koizumi, agreed at their Thursday meeting on a wide range of reform initiatives, including the basic framework of the fiscal 2002 budget.

The draft says the new issuance of government bonds will be limited to 30 trillion yen and it calls for a review of the social security system and the relationship between the central and local governments.