The review by the agency in charge of Japan's Self-Defense Forcessaid the nation must prepare a more mobile, less costly military both to deter would-be invaders and expand its role overseas.

"The SDF must establish a joint operational posture linking SDF units organically so that they can carry out their missions swiftly and effectively," the report said.

A unified command under a new joint forces chief would help "enable the SDF to promptly fulfill ... diversifying roles", such as the deployment of some 550 Japanese troops in Iraq to aid its reconstruction, it said.

The current alignment, meant to counter invasion by armed forces, submarines and aircraft, is "problematic in terms of speed and timing" and not well suited to deal with "new threats" of terrorism, nuclear missiles, or handle peaceful missions abroad, the report said.

As the SDF fetes its 50th anniversary amid ongoing debate about whether its existence goes against Japan's pacifist constitution, many at home and abroad see the expanding role of Japan's military with mixed feelings.

Asian neighbors remain stung by Japanese aggression in World War II, but politicians like Prime Minister Junichiro Koizumi have sought to push Japan onto the world stage and bolster military ties with its closest ally, the United States, which posts some 40,500 troops here.

With a defense budget that shrank 1.0 percent to 4.9 trillion yenbillion dollars) for the year to March 2005, Japan must also "modify the scale of its forces" but maintain the capability to face "a full-scale invasion," the report said.

"Just because it (the budget) is shrinking does not mean our abilities should decline," agency defense councillor Kokichi Tomita told reporters.

The report, which covered regional hot spots like North Korea and the Taiwan Strait and on territorial disputes with Russia and China, also noted with alarm ramped-up military spending in the region.

China raised its fiscal 2004 defense budget by 11.6 percent -- at a pace that far exceeded the rate of growth in its gross domestic product -- to around 25.4 billion dollars while Russia's grew 16.2 percent in 2004 to 14.4 billion dollars, it said.

"It is true that, for example in the case of China, that is a worry," said

Tomita.

Japan continues to build up a ballistic missile defense program -- meant to deter the North Korean nuclear threat -- setting aside 106.8 billion yen for the current fiscal year.

Japan's military spending in the current fiscal year ranked it third in the world behind the United States and Britain, although China's reported spending is thought to be a fraction of the total, the report said.

The SDF has 236,000 troops, including 147,000 ground forces, about 1,000 tanks, 1,220 armored vehicles, 16 submarines, 50 destroyers, some 570 tactical aircraft and some 620 helicopters, the report said.

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