Japan has already developed an advanced space programme
Japanese MPs have backed plans to scrap rules restricting the use of military technology in space.
Lawmakers say Japan still opposes putting weapons into space, but claim the rules drawn up in 1969 have stifled innovation by Japanese firms.
Some supporters of the bill say it could open the way to Japan launching spy satellites.
Tokyo was alarmed last year when China conducted a test and shot down one of its own weather satellites.
The bill is backed by government and opposition MPs, making it almost certain to become law in the next few weeks.
The BBC's Chris Hogg, in Tokyo, says the MPs' decision is controversial because Japan is officially a pacifist country.
The new legislation would overturn a parliamentary resolution passed in 1969 that limited Japan's use of space to non-military missions.
It would mean the Defence Ministry could develop and operate spy satellites and other hardware designed to enhance the country's security.
But during the parliamentary debate on this new bill, lawmakers said they still opposed putting weapons in space.
Japan stepped up military research 10 years ago when North Korea fired a missile over the Japanese mainland.
It is developing a missile shield with the help of the US to try to protect its cities and military installations.
It also has a space programme - one of its satellites is currently carrying out a survey of the moon.