Japan is considering building its first ever civilian passenger jet, which could enter service as early as 2012.
Mitsubishi Heavy Industries, a large industrial group which supplies parts to Boeing, is studying plans to build small planes with up to 92 seats.
Newspaper reports have suggested the project could cost $1bn and the government may fund 30% of the outlay.
Fellow Japanese firm Honda is developing a light aircraft in the US, which it hopes to have ready by 2010.
Two models
The small jet market, dominated by firms such as Bombardier and Embraer, is expected to grow strongly in the future as the number of people flying globally increases.
"If it does decide to go ahead, it expects the first commercial flight in 2012."
Research by Japan's Aircraft Development Corporation has indicated that the number of 20-99 seater planes operating worldwide is set to increase from about 5,000 last year to more than 8,800 by 2025.
Mitsubishi said it was exploring whether the project was affordable and whether there would be a sufficient market for two versions of the plane, able to carry a maximum of 72 and 92 passengers.
It believes it would have to sell between 350 and 600 aircraft to make the venture profitable.
But any talk of likely development costs at this stage was highly speculative, it stressed.
"Mitsubishi will decide whether it will go ahead with the development and manufacturing by March 2008," spokesman Hideo Ikuno said.
"If it does decide to go ahead, it expects the first commercial flight in 2012."
Government funding
The project is likely to need significant government subsidies to proceed, as well as substantial private investment.
A government spokesman said that no decision had been taken on whether it would provide any funding.
Japan has a relatively small-scale civil aerospace sector, manufacturers having provided parts for Boeing aircraft for decades.
The country's first post-war commercial propeller plane, built in the 1960s, was jointly funded by the government and private companies.
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