TOKYO - Japan should improve its defence capability in the southwest where it shares a maritime border with China, its vice-defence minister said on Wednesday.

Vice-Defence Minister Jun Azumi also said Japan's weapons export ban, which has kept the nation's defence industry from taking part in multinational projects and cutting costs, needs to be revised, a change that would be a boost to defence contractors such as Mitsubishi Heavy Industries.

Japan is updating its National Defence Programme Guideline (NDPG) for release by the end of the year amid heightened regional tensions.

That will be the first revision in six years and the first under the Democratic Party of Japan (DPJ) government, which swept to power last year.

"In a sense, the Cold War era structure has remained unchanged in the Far East." Azumi told Reuters in an interview.

"Our attention was on the north during the Cold War. But we have to shift our focus to the defence of southwest ... The most important step to strengthen our defence over the next 10 years is to secure the mobility (of our troops)."

Japan's defence capability has traditionally been allocated heavily in the north to respond to potential threats from the former Soviet Union.

Arms export ban needs to be revised - Azumi

On Japan's decades-old arms export ban, Azumi said the policy is out of snyc with the current security environment and is helping drive up procurement costs for defence equipment.

Japan in 1967 drew up "three principles" on arms exports, banning sales to countries with communist governments or that are involved in international conflicts or subject to United Nations sanctions. The rules eventually became an almost blanket ban on arms exports and on the development and production of weapons with countries other than the United States.

The ban prohibits Japan's defence industry from joining multinational projects such as the Lockheed Martin-led F-35 Joint Strike Fighter. That makes it difficult for Japanese defence contractors to drive down costs and keep up with cutting-edge arms technologies.

"Because of the ban, an irrational restriction is in place that drives up our procurement costs at a time of fiscal discipline," Azumi said.

"The way the problem needs to be addressed will be mapped out in the National Defence Programme Guideline," Azumi said.

But efforts by Prime Minister Naoto Kan to win support from a former coalition partner, the pacifist Social Democrats, for enacting laws in a divided parliament look likely to delay the easing of the ban, Japanese media reported.

Azumi said Japan's massive public debt, now about twice the size of the $5 trillion economy, made it difficult to ramp up defence spending.

China's defence spending has nearly quadrupled over the past decade, while Japan's shrank by 4 percent, Japan's defence white paper showed.

"We would like to boost our defence capability on land, on the sea and in the sky if budget allows," Azumi said, but added that such policies were not possible due to fiscal constraints.

Japan eyes closer security ties with S.Korea

Azumi also said Japan aims to strengthen its security cooperation with South Korea, Australia and India, on top of its ties with closest ally the United States.

"Given our history, there might have been reluctance on the South Korean side (for security cooperation with Japan). But due to the North Korean situation, the environment for such talks is developing," Azumi said. Many in South Korea still resent Japan's often-brutal 1910-45 colonisation of the peninsula.

South Korean military officers are participating in a joint military exercise between Japan and the United States this week for the first time as observers.