The House of Representatives will vote on the budget later in the day and the budget is expected to be passed around 9 p.m. (1200 GMT).
The fiscal 2001 budget is designed to help Japan attain an official economic growth target of 1.7 per cent for fiscal 2001.
The general-account budget for the fiscal year, which begins April 1, is 2.7 per cent lower at 82.65 trillion yen than fiscal 2000's record 84.99 trillion yen.
If approved, the budget for the fiscal year starting April 1 is expected to be sent immediately to the House of Councillors.
The Friday passage of the budget through the lower chamber would make it unnecessary for the government to compile a provisional budget because the budget will be enacted by the end of this month. Under constitutional rules, the budget automatically becomes law 30 days after the lower house passage, even if the upper house fails to approve it.
Senior government officials have been calling for an early passage of the budget through the Diet to support the nation's fragile economic recovery amid the weak Tokyo stock market. The Tokyo stock market on Friday fell below 12,500 for the first time since September 1985.
Spending on discretionary policy items, known as general expenditures, is the largest component in the general-account budget, covering everything from social security, defence and education to public works. It does not, however, cover government bond servicing and tax grants to local governments.
The 48.66 trillion yen in discretionary spending for fiscal 2001 is the highest ever, surpassing the previous high of 48.1 trillion yen for fiscal 2000.
The budget estimates total revenues of 54.33 trillion yen, including 50.73 trillion yen in tax and stamp revenues. The government plans to issue new government bonds totalling 28.32 trillion yen, down 13.2 per cent from the initial budget for the current fiscal year. It was the first time in three years that the government has reduced its issuance of new bonds.
Although the government expects tax revenues of more than 50 trillion yen, it will continue to rely on deficit-covering bonds. The dependence ratio on national bond issues - the ratio of bond issuance to the total general-account budget - remains high at 34.3 per cent.
The government, which has relied on government bonds to bolster the economy, is in debt to the tune of 506 trillion yen (4.3 trillion dollars). The figure includes loans of 109 trillion yen from private financial institutions.
The government has been using fiscal stimulus spending packages for the past several years in hopes of reviving the economy. But the country is struggling to revive a moribund economy as one large insurance company after another collapses under a mountain of bad loans accumulated since the financial bubble burst in the early 1990s.
(la/dpa)
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