Japan has approved a joint missile defence programme with the US.
Japan is making sweeping changes to its defence policy
The project aims to produce an advanced version of the US system, which seeks to destroy incoming missiles before they reach their targets.
Chief cabinet secretary Shinzo Abe said Japan needed to defend itself against ballistic missiles under the current international circumstances.
The move comes amid concerns at North Korea's growing missile capability, as well as other regional threats.
Prime Minister Junichuro Koizumi signed off a budget that will set aside more than $25m (£14.4m) for initial work.
The politically sensitive project is expected to take nine years to complete, with Japan shouldering more than $1bn of the overall costs.
The cabinet's controversial decision is seen by many Japanese as being made in breach of the so-called peace clause of the constitution, which specifically renounces the country's capacity to make war.
The joint project, whose products will be sold to the US, will also technically break Japan's strict embargo on exporting arms, a breach that successive defence agency chiefs have described as inevitable.