Prime Minister Shinzo Abe's administration has cut spending to promote Okinawa's economy after the prefecture elected a governor staunchly opposed to a plan to relocate a U.S. military base on the island.

Mr. Abe's cabinet on Wednesday approved a record-high Y96.34 trillion national budget for the fiscal year starting in April, one heavy on social welfare and defense spending.But the government reduced the amount allocated to Okinawa, which plays host to three-quarters of U.S. bases in Japan, for the first time in five years....