Japan's defence budget will rise 1.1% to a record 5.31 trillion yen ($48.56 billion) in the year starting April 1. Japan's parliament, which is dominated by Prime Minister Shinzo Abe's ruling Liberal Democratic Party, will vote on the spending plan next year.

Despite a constitution that forbids the possession of offensive weapons, Japan is one of the world's biggest military spenders. Outlays on defence have increased by almost 15% in less than a decade, spurred on by neighbouring China modernising its military and North Korea developing nuclear weapons and missiles that could deliver them anywhere in Japan.

Much of Japan's recent defence spending splurge has gone on equipment supplied by U.S. defence contractors such as Lockheed Martin Corp and Raytheon Co. Local makers such as Mitsubishi Heavy Industries have seen their share of defence spending shrink.

President Donald Trump has thanked Abe for buying the U.S. equipment, helping ease trade tensions between the allies.

Big-ticket purchases next year will include nine Lockheed Martin F-35 stealth fighters, including six short take-off and vertical landing (STOVL) B variants it wants to fly off aircraft carriers, for 107 billion yen. Japan plans to deploy them to extend the operational range of its Self Defence Forces.

Japan's Ministry of Defence will also spend more than $1 billion to strengthen its ballistic missile defences (BMD), including the purchase of a new generation of missiles designed by Raytheon to shoot down incoming warheads in space. It is also appropriating funds to begin building two ground-based Aegis Ashore missile tracking stations with powerful new radars.

(Reporting by Tim Kelly; Editing by Simon Cameron-Moore)

By Tim Kelly