The BBC's Juliet Hindell reports on Japan's growing fears about North Korea

The system would include missiles which detect and pursue target missiles using infra-red rays, warheads and engines for a three-stage rocket.

The complete project, which is a development of the so-called Star Wars anti-missile shield advocated by former US President Ronald Reagan, is expected to cost between $50bn to $60bn.

Both countries will share the cost of the programme.

They agreed to conduct research into the new defence system last year after North Korea launched a medium-range Taepodong I missile over Japan without any prior warning.

Condemnation

The missile landed in the Pacific Ocean, but proved that Japan is well within range.

The test provoked widespread condemnation from South Korea, Japan and the United States.

Japan has warned North Korea that it may cut a key lifeline of hard currency if it goes ahead with a second missile test.

It is considering a ban on Koreans living in Japan sending money to the impoverished country.

North Korea has said launching a rocket is a matter of sovereignty and it will do so when it deems necessary.

It also says it believes Japan will start invading other Asian countries again if it has a stronger military.

At the moment, Japan has no satellite surveillance or defence systems of its own .