Japan and the United States have agreed in principle on the licensed producing of Patriot Advanced Capability 3 surface-to-air missiles in Japan, the Nihon Keizai Shimbun reported Tuesday.

In line with the accord, Japan's Mitsubishi Heavy Industries Ltd. is expected to start making the PAC3 in fiscal 2005 under a licensing agreement with Lockheed Martin Corp. of the United States, the economic daily said in a front-page article.

The missile, a key component of the next-generation missile defense system, is scheduled to be deployed in Japan beginning in fiscal 2008.

The basic agreement came after Tokyo asked Washington to allow a Japanese firm to build the PAC3 to help the Japanese defense industry maintain its manufacturing technology, the newspaper said.

Japan's biggest defense contractor with order receipts worth some 280 billion yen (2.6 billion US dollars) in fiscal 2003, Mitsubishi Heavy expects to earn more than 100 billion yen (940 million US dollars) from the licensed producing of the PAC3 alone, it said.