Finance Minister Masajuro Shiokawa said Friday he hopes to cut public works spending by about 3 percent in the fiscal 2004 budget as part of efforts to reduce the size of the overall budget.

"I think we will have to carry out a cut of about 3 percent," Shiokawa said at a news conference. "We will try to do this not through the number of projects, but by the lowering of project costs."

Shiokawa was referring to efforts to prevent the spending cut from hurting Japan's ailing economy. Trimming the number of public works projects could have a significant impact, especially on local-level economies.

Public works spending was also one of the key areas cut in the fiscal 2003 budget to keep down overall expenditures. It was reduced by 3.7 percent to 8.9 trillion yen.

Earlier this week, Shiokawa said he intends to limit spending in the fiscal 2004 budget to around or below the 81.79 trillion yen under the fiscal 2003 budget.

The compilation process for next fiscal year's budget will begin next month, when the ministry's Fiscal System Council comes up with a report that will serve as the backbone for budgetary request guidelines.

The Council on Economic and Fiscal Policy, a key economic policy-setting panel led by Prime Minister Junichiro Koizumi, is also expected to hold discussions before a decision on the guidelines is made around late June or July.