Video purportedly showing the death of Kenji Goto leads to condemnation globally and new fears in the pacifist nation.
Japan will offer an extra $15m in aid to fight armed groups in the Middle East and Africa.
Still reeling from the murder of two nationals by members of the Islamic State of Iraq and the Levant (ISIL) group, Japan hopes to demonstrate its resolve not to cave in to attacks with the fresh assistance, a report said on Sunday.
The funding will be announced at a global conference starting on Wednesday in Washington, the Sankei Shimbun said, according to the AFP news agency.
The report said the money would be distributed through international organisations to affected regions, including countries bordering Syria and Iraq. Large parts of those countries are controlled by ISIL fighters.
Prime Minister Shinzo Abe has been criticised over the timing of an earlier $200m Japanese pledge to help refugees fleeing ISIL-controlled areas.
Abe announced the $200m aid in Egypt on January 17, saying Japan would “help curb the threat” of ISIL and give the money “for those countries contending with” the group’s fighters.
The announcement was followed by the hostage drama, with ISIL demanding the same sum in exchange for a captured Japanese contractor and a journalist.
The group’s fighters later changed their demand to the release of a death row inmate from a Jordanian prison.
Tokyo pressed Jordan for its help, but ISIL eventually announced the killing of the pair as well as a Jordanian airman.