Japan plans to review its self-imposed ban on weapons exports, according to a draft of the country's new security strategy, a proposal that could unnerve China and South Korea.
Resentment over Japan's wartime aggression still runs deep in both countries and any decision by Japan to become more active militarily is likely to cause tension.
Beijing and Seoul have long-running territorial disputes with Tokyo over different sets of tiny islets.
The draft, based on recommendations by a panel of security experts, is set to be fine-tuned into the final version by December and the direction of the strategy will be reflected in Japan's new defence guidelines, due also by the end of the year.
Japanese Prime Minister Shinzo Abe took office in December for a rare second term, pledging to bolster the military to cope with what Japan sees as an increasingly threatening security environment including an assertive China and an unpredictable North Korea.
Pacifism by law
Abe also aims to lift the constraints placed by Japan's post-war pacifist constitution on its military.
Article 9 of the constitution, drafted by occupying US forces after the country's defeat in world war two, renounces the right to wage war and, if taken literally, rules out the very notion of a standing army.
Japan "will contribute more actively than before to securing the world's peace, stability and prosperity, from the standpoint of active pacifism based on the principle of international cooperation," the draft said.
It said Japan's decades-old ban on weapons export needs to be revised, a move that would reinvigorate Japan's struggling defence industry.
Japan in 1967 drew up "three principles" on arms exports, banning sales to countries with communist governments or that are involved in international conflicts or subject to United Nations sanctions.
But the rules eventually became almost a blanket ban on arms exports and on the development and production of weapons with countries other than the United States, making it difficult for Japanese defence contractors to drive down costs and keep up with cutting-edge arms technology.
Defence contractors that could benefit from any loosening of the ban include Mitsubishi and Kawasaki.