A funding agreement struck between Tokyo, the Japanese government and the Japanese Sports Council has resurrected plans for the city’s 2020 Olympic and Paralympic stadium.

Tokyo’s City Government will put ¥39.5bn (US$320m, £213m, €303m) towards the overall ¥158bn (US$1.3bn, £852m, €1.2bn) cost of the stadium, with the national government paying half of the total. The remainder will be made up by the Japanese Sports Council.

The deal was agreed following talks between Tokyo governor Yoichi Masuzoe, Olympics minister Toshiaki Endo and sports and education minister Hiroshi Hase.

“As governor of the city to host the Olympic competition in 2020, I would like to accept the budget plan,” said Masuzoe.

In July, Japan prime minister Shinzo Abe withdrew the plans for the stadium as costs surpassed original estimates, hitting ¥252bn (£1.3bn, $2bn, €1.8bn). Abe said said the project would “start from zero” a few days after appearing to approve Zaha Hadid’s designs for the stadium.

Officials are hoping to unveil the new stadium design by the end of the year, with work expected to start in 2016. The stadium is due to be completed by January 2020, although it was originally meant to be a host location for Japan’s 2019 Rugby World Cup.