Japan will allow domestic firms to take part in production of the F-35 fighter, the first such case since Tokyo last year relaxed a self-imposed ban on arms exports, a report said Thursday.

Japanese firms will make up to 40 percent of parts that will be used in the stealth jet from 2017, the Yomiuri Shimbun said in its evening edition, without citing sources.

Japan has decided to replace its ageing fighter fleet with the jet, developed jointly by the United States, Britain and seven other partner countries.

But Japanese firms have not thus far participated in the project because of the nation's 1967 decision to tightly control foreign weapons sales, which later became an effective ban on all sales of weapons and related technology.

Rare exceptions were made for projects involving technological cooperation with the United States, Japan's sole military ally, to develop the missile defence system.

The policy is part of Japan's strict pacifism initially imposed by the victorious US after World War II and subsequently embraced by much of the populace.

But experts had long argued that Japan was routinely forced to pay premium prices for internationally-developed military tools because the country had not taken part in the project to build them.

"Japanese firms' participation in production of parts for F35 should help maintain and improve domestic defence technology," the centre-right Yomiuri said.

"It could also bring economic benefit as the aviation industry covers a wide range of companies," it said.

The cabinet of Prime Minister Yoshihiko Noda will officially make the decision Friday, the Yomiuri said.

Noda hopes to tell US President Barack Obama about the shift on the sidelines of the Association of Southeast Asian Nations summit in Cambodia later this month, the Yomiuri said.