NEW YORK -- Pitcher Andy Pettitte's $11.5 million option was exercised Thursday by the New York Yankees in the team's first big decision of the offseason.

New York, which says it intends to cut payroll, could have given a $2 million buyout to the 30-year-old left-hander, who had filed conditionally for free agency on Monday.

The Yankees, who had until Friday to make their decision, announced the move while general manager Brian Cashman was on a flight from Los Angeles to Japan -- where the team is expected to court free agent outfielder Hideki Matsui.

Pettitte was 13-5 with a 3.27 ERA last season but was limited to 22 starts because of elbow pain. He ended the season with nine wins in 11 starts.

New York also has Mike Mussina, David Wells, Jeff Weaver and Sterling Hitchcock under contract, and must make decisions on Roger Clemens, who became a free agent, and Orlando Hernandez, who is eligible for salary arbitration.

The Yankees, who have not progressed far in negotiations with any of their players, also must make decisions on third baseman Robin Ventura and relievers Mike Stanton and Ramiro Mendoza, who also became free agents.

Yankees president Randy Levine also was traveling to Japan, where the team is expected to announce a working agreement with the Yomiuri Giants of the Central League -- Matsui's former team.

The 28-year-old outfielder, nicknamed "Godzilla,'' hit .334 for the Giants this season and led the Central League with 50 homers and 107 RBIs. In 10 seasons with the Giants, he hit 332 homers, winning the Central League's MVP in 1996, 2000 and this year.