Prime Minister Junichiro Koizumi's cabinet will hold a meeting on Thursday, hoping to adopt the first package of defence policy guidelines since 1995, a senior official of the ruling Liberal Democratic Party (LDP) said.

"We will keep on trying to coordinate our views for the meeting," Fukushiro Nukaga, the LDP's chief security planner, told reporters.

The guidelines, which will serve as a basis for defence planners to work out short- and medium-term military programmes, had been expected in late November.

But finance and defence officials remained divided on how much to slash the number of ground troops in Japan's defense strategy for the coming decade.

"Unfortunately, no resolution was reached," Defence Agency Director-General Yoshinori Ono told reporters after meeting with Finance Minister Sadakazu Tanigaki.

The Defence Agency had originally hoped to increase the number of ground troops from 160,000 to 162,000 over 10 years to respond to threats of terrorism, natural disasters and other new types of missions.

But, in view of the tight budgetary situation, the agency now suggested the number be set at 158,000 while the Finance Ministry sought a cutback to 145,000, press reports said.

A draft of the new guidelines warned of threats from China and North Korea. The 1995 guidelines only mentioned Russia by name as a threat, according to an LDP security affairs official.

"North Korea's military moves are a major destabilising factor for regional security while there is a need to closely watch such developments as China's military modernisation and expansion of the scope of its sea activities," said a passage quoted by the official.

Earlier this month Beijing expressed regret for the intrusion of a Chinese nuclear submarine into Japanese waters near islands disputed by the two countries.

Prime Minister Koizumi told reporters that Japan's next medium-term defence build-up programme for 2005-2009 would be smaller than the previous one for the first time.

"It will be difficult to work out because there are areas in which spending should be increased," he said. "There will be a decline as a whole."

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