ANNAPOLIS -- Citing budgetary reasons, Maryland has decided to close its $500,000-a-year office in Tokyo, a state official said yesterday.

Because the office had not been producing enough Japanese investment in Maryland, and because the state's budget problems were worsening, the Department of Economic and Employment Development decided to consolidate its Far East presence in Honk Kong, said Mark L. Wasserman, secretary of the department. The Maryland International Division's foreign operations have drawn fire from state legislators and auditors.

Michael Grose, who was paid $146,000 a year under a contract with DEED's International Division to run the office, was informed last week by the acting director of the division that he was being dismissed, Mr. Wasserman said. "We have reached a mutual parting of the ways with Michael Grose," the secretary said.