TOKYO - The Cabinet of Prime Minister Yoshihiko Noda approved Saturday a $1.16 trillion budget for the fiscal year from next April as it grapples to fund post-quake reconstruction work, finance mounting social security costs against the backdrop of reining in its massive public debt.

Despite Finance Minister Jun Azumi unequivocally stating that Japan can no longer rely on new debt as the nation's debt has reached its limit, the government on Saturday said that it will bank on a record amount of bonds to generate more than 49 percent of the revenue needed for the draft budget.

"I think that Japan's budget-making processes and its reliance on public debt have reached their limits," Azumi told a news conference after a Cabinet meeting.

Azumi was referring to the government's constant dependance on bonds for revenue to finance budgets, the latest of which will be submitted to parliament next year, with new bonds provisionally capped at a total of $565 billion.

However, the new bonds will add to Japan's burgeoning public debt, which at double the size of the nation's GDP, will ensure that Noda's plans to bring his financial house in order and maintain fiscal discipline will continue to be an uphill struggle as the nation must also contend with a persistently strong yen, slumping exports and economic growth that has recently been downwardly revised.

While the draft budget on paper is 2.2 percent smaller than the original budget for the ongoing year to March, economists have been quick to note that in addition to supplementary budgetary components, such as those related to post-quake reconstruction costs, the current draft is Japan's largest ever.

Economists estimate that the total value of the budget is actually in the region of $1.23 trillion.

According to finance ministry forecasts, central and local governments' long-term debt is set to increase to about $12 trillion at the end of March 2013 from a year earlier, marking a new record-high for the nation.

However, Noda's planned tax hikes to help rehabilitate the nation's dire finances have yet to find favor from within his own divided Democratic Party of Japan (DPJ).

In addition, the proposed tax hike from the current 5 percent has been resisted by opposition bloc's key decision makers as well as the general public whose support for Noda's Cabinet has been waning.

Cajoling support from within the DPJ and from opposition parties to pass Noda's tax bill through Japan's bicameral parliament in which the opposition-bloc hold sway in its upper house, will be a monumental challenge for Japan's leader.

Azumi has implored the government to peruse every available option to reform tax and budgetary-related paradigms to gain public trust in the administration and appease the international community, increasingly concerned about the knock-on effect of Japan's ballooning credit crisis.

Japan's finance minister has also called for the government to further consider and implement wholesale spending cuts, as rising social service costs related to a rapidly aging society and declining birthrate in Japan will have to be met.

The current budget draft shows the full extent of Japan's ever- worsening fiscal predicament with tax revenue of $542.7 billion forecast - missing targets for bond issuance for a third consecutive year.

In addition, estimates put debt-servicing costs in the region of $281 billion, which is 25 percent of the planned budget and just over 50 percent of the projected tax revenue.

The draft budget however omits funds to the tune of $48.3 billion needed for reconstruction initiatives in earthquake and tsunami-hit regions on Japan's eastern seaboard and doesn't include $34.4 billion in bonds for reconstruction.

Spending on public works was slashed by 8.1 percent to $56 billion in the draft budget from fiscal year 2012 and national defense, as well as official development assistance funds were also cut, squeezed by the government's mounting debt - servicing costs.