Organisers were due to construct the Arena, located in Tokyo Bay, as part of initial Games plans but the project was then placed under review amid fears of spiralling costs.

Koike has revealed that plans to use the Yokohama Arena, a popular venue for music and sport, had now been scrapped and that they were sticking with the original proposal.

The Governor has also claimed building the Ariake Arena will cost significantly less than first thought - ¥33.9 billion (£231 million/$287 million/€275 million) instead of ¥40.4 billion (£275 million/$342 million/€327 million).

The aquatics and canoeing venues due to feature at the Olympics and Paralympics in the Japanese capital have also been the subject of significant savings, Koike said during her weekly press conference at City Hall.

The Aquatics Centre will set organisers back ¥29.8 billion (£203 million/$253 million/€241 million) rather than the initial projection of ¥49.1 billion (£334 million/$416 million/€398 million), while the canoeing facility is now due to cost around ¥52 billion (£354 million/$441 million/€421 million), down from ¥68.3 billion (£465 million/$579 billion/€553 million).

The Ariake Arena proposal will now be put forward to the Four Party Working Group consisting of representatives from the International Olympic Committee (IOC), Tokyo 2020 and both the Central and City Governments for approval on Wednesday (December 21).

It was the last venue which needed to be decided.

"It’s not only about seeking ways to reduce costs," Koike said.

"It will create added value for the whole area.

"I have taken into account various factors along with the IOC’s Agenda 2020, including usage of existing facilities and how much each option would cost."

The Yokohama alternative was one of three proposed by a Taskforce commissioned by Koike in a bid to cut costs amid concerns of a budget that may have expanded to three times its original estimate.

An alternative aquatics centre and a rowing and canoe sprint venue 400 kilometres away at Tome in Miyagi Prefecture were each rejected in favour of downscaled versions of existing plans for new venues - the Olympic Aquatics Stadium and Sea Forest course respectively.

Tokyo 2020 have expressed their delight at the choice of the Ariake Arena over the facility in Yokohama, which had been criticised by the Japan Volleyball Association and the Yokohama Municipal Government.

Although the shift to an existing venue would have cut costs, it would have also added additional overlay fees as well as logistical pressures from holding another sport outside the capital city.

Abandoning the Ariake plan would have also caused the loss of any legacy benefit from a new venue.

"We are aware that Tokyo Governor Koike made an announcement about her decision on constructing the Ariake Arena," Tokyo 2020 said in a statement sent to insidethegames.

"Tokyo 2020 understands that further discussions will be held at a four-party meeting later this month, and a final conclusion will be drawn.

"Tokyo Metropolitan Government reached this decision after examining all of the choices carefully.

"And in this respect, we are delighted to hear that the original venue plan is once again considered to be pursued.

"The Ariake Arena to be set in the heart of the Tokyo Bay area will not only represent an iconic venue of the Games but become an important post-Games legacy enriching the metropolitan life through sports and culture."