Japan has pledged large spending cuts, but delayed a decision on raising a controversial sales tax intended to help reduce its massive public debt.
The fiscal plan passed Thursday by Japan's Cabinet would cut $83 billion over two years, though there were few details about where the reductions would be made.
Meanwhile, the government said it will wait until September on whether to go ahead with a two-stage plan to double the sales tax by 2015.
Prime Minister Shinzo Abe supports the tax hike. But some in his government say the plan could derail Japan's fragile economic recovery and have called for a delay or a more moderate tax increase.
Abe is trying to revitalize an economy that has been stagnant for decades and reduce Japan's government debt, which is more than twice the size of its economy.
His strategy, known as Abenomics, has so far relied on boosting public spending in order to spur growth and aggressive monetary easing, or increasing the money supply, to help fight deflation.
But the third so-called "arrow" of Abe's plan involves structural reforms to Japan's economy that could prove to be painful and more politically difficult.
Earlier this week, the International Monetary Fund urged Japan to go ahead with "credible fiscal and structural reforms." It also urged Tokyo to implement the sales tax hike, which it called an "essential first step" to fixing Japan's fiscal problems.
Some information for this report was provided by AP, AFP and Reuters