The government decided to launch in the financial year from March 2006 development of the system based on the US sea-based Standard Missile 3after six years of joint research.

"The missile defence system is purely and solely defensive in nature to protect the lives and assets of the people," Chief Cabinet Secretary Shinzo Abe said in a statement after the decision.

"It is appropriate to proceed with the joint development in order to secure the capability to deal with the threat of ballistic missiles," the top government spokesman said, despite lingering doubts about the precision of such a system.

Japan has been in a hurry to build a missile defense system with the United States since North Korea stunned the world in 1998 by firing a missile over the Japanese mainland into the Pacific.

The cabinet of Prime Minister Junichiro Koizumi approved a three billion yen (2.5 million dollar) budget in the financial year for development costs as requested by the Defense Agency.

It also earmarked 700 million yen for remaining work on the joint research.

Abe, the top government spokesman, said that the joint missile project would be carried out without infringing on Japan's strict control on exports of arms.

The SM-3 is part of an anti-missile shield which also includes the land-based surface-to-air PAC-3.

SM-3s intercept ballistic missiles when they reach their highest point outside of the atmosphere and PAC-3 missiles are used to destroy missiles that evade SM-3 interceptions.

The SM-3 interceptors will be based on destroyers equipped with the state-of-the-art Aegis air-defence system.

Fukushiro Nukaga, the state minister for defence, said last week Japan would shoulder about one billion to 1.2 billion dollars of the cost of the nine-year project. The US side is expected to chip in 1.1-1.5 billion dollars.

"The system will contribute to stability in the region as it will strengthen our country's defence capability at a time amid the proliferation of ballistic missiles," he told reporters Saturday.

"We hope to spare no effort in explaining the purpose of the (missile) policy pursued by Japan and the United States," he added.

The missile-defence project has been a major part of the strengthened Japan-US military alliance in recent years and is excluded from Japan's ban on arms exports.

In 1967, Japan banned exports of weapons to the Communist bloc, countries under United Nations sanctions and those in international conflicts. The government tightened the ban in 1976 preventing all arms exports regardless of destination. But transfer of military technology to the United States was made an exception.

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