The close allies have been jointly conducting research into the missile defense system amid growing concern about North Korea and rising tension between Japan and China.

"The Japanese government estimates the cost would be about 1.0-1.2 billion dollars for the development program," a Defense Agency spokeswoman said.

She said the agency has requested a budget allocation of 3 billion yen (25.56 million dollars) for fiscal 2006 to start building the missile system.

But she said Japan has not yet made the final decision to start development of the system.

The two nations plan to move on from the research they began in 1999 to the development stage sometime from March, Kyodo News reported.

The Yomiuri Shimbun reported Thursday that Japan's share would be much less than feared. The newspaper has previously reported that the United States wanted to split costs evenly with Tokyo.

Japan's defense spending has been curtailed for three straight years up to March 2006 as Prime Minister Junichiro Koizumi advocated an austere budget.

Washington's initial estimate saw the United States shouldering 545 million dollars until the fiscal year to March 2012 with work on the project starting in fiscal 2006, the Yomiuri has previously reported.

But the amount nearly tripled after Washington extended the period for development to 2014 and recalculated the amount based on previous weaponry projects, the mass-circulation daily said.

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.

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