Tokyo, Japan: Japan said Friday it would slash the cost of Tokyo's new 2020 Olympic stadium by more than 40 percent, after ditching its original plan due to the eye-watering $2 billion price tag.

The cabinet approved setting a 155 billion yen ($1.28 billion) cap on construction costs, well below the 265 billion yen estimated under the now-scrapped design.

The original was on track to become the world's most expensive sports stadium.

‘We have achieved a considerable reduction in costs,’ Prime Minister Shinzo Abe told a cabinet meeting after adopting the plan on Friday.

But ‘we need to complete construction for sure in time for the 2020 Games’, he added.

Among the changes, the more budget friendly stadium will not have air conditioning for spectator stands and seating capacity would be reduced by at least 4,000 to 68,000 people.

On Tuesday, the International Olympic Committee demanded that Japan complete its new national stadium by January 2020, three months earlier than planned. Tokyo is due to host the opening ceremony on 24 July that year.

Last month, Japan's premier surprised the IOC as he cancelled the stadium designed by Iraqi-British architect Zaha Hadid due to cost overruns.

The stadium change has also angered World Rugby because the new venue will not be ready in time for the 2019 World Cup being hosted by Japan.  

On Thursday, Japan promised to supply a new list of venues and fresh tournament budget to satisfy rugby's governing body.

Tokyo will launch a new tender next month and hopes to have a revised stadium design in place before the end of 2015.