Speaking at a US marine base, ambassador Howard Baker said the decision by the Japanese government was to “dispatch a group of self-defence forces to Iraq - and probably still this year".
Visiting Defence Secretary Donald Rumsfeld added Japan had “not decided not to send troops".
Tokyo had been expected to commit about 150 non-combat troops to Iraq before the end of the year. But after last Wednesday's attack in the southern town of Nasiriya that killed 18 Italians, government officials said dispatching the troops was impossible under present conditions.
Following the attack, Japanese Defence Minister Shigeru Ishiba told Rumsfeld his government still intended to send troops to Iraq at an unspecified date and was closely watching the situation on the ground.
But it now faces a quandary, torn between its alliance with the US and domestic public opinion, which opposed the US-led war in Iraq and is predominantly against sending troops to the country.
Hoping to improve the situation, Rumsfeld flew to Okinawa on Sunday to meet local community leaders and see first-hand a military presence that Washington is under pressure to reduce its commitments worldwide.
The US has 47,000 soldiers based
Over two-thirds of the estimated 47,000 US troops in Japan are based in Okinawa, including more than 17,000 marines poised to reinforce US forces in South Korea.
But the US presence in Okinawa has aroused bitter opposition on the island since the 1995 rape of a 12-year-old schoolgirl by three marines.
An agreement to lighten the US presence and begin returning land to Okinawans was launched after the rape to ease tensions, but US officials concede the process has lost momentum.
Rumsfeld presented Japanese leaders in talks on Friday and Saturday with plans for altering the US military "footprint" as part of a sweeping realignment of US forces around the world.
"But we don't have any specifics because it will take a good deal of discussion," he told a news conference in Tokyo on Saturday.
On a closely related issue, Rumsfeld has pressed Japanese leaders to resume negotiations on changes in a US-Japan Status of Forces Agreement which defines the legal status of US military personnel in the country.
Washington wants guarantees US service members will receive the full protection afforded under US law, including the right to have a lawyer present when being questioned in the period before formal indictment is brought in serious crimes such as rape.