By Kiyoshi Takenaka
TOKYO, March 12 (Reuters) - Japan plans to ease self-imposed arms export curbs, ruling bloc lawmakers said on Wednesday, in the first potential overhaul of arms export policy in half a century likely to worry giant neighbour China.
The easing of export restrictions is part of Prime Minister Shinzo Abe's plan to bolster Japan's military and strengthen security ties with allies such as the United States.
Such a move is expected to reinvigorate Japan's defence industry, which has been virtually excluded from the overseas market, but will likely concern China and South Korea, where bitter memories of Japan's past militarism run deep.
The restrictions have long made it difficult for Japanese defence contractors such as Mitsubishi Heavy Industries and Kawasaki Heavy Industries to keep abreast of technological development and drive down costs.
Abe, who returned to power for a rare second term in December 2012, raised Japan's defence budget for the first time in 11 years, and aims to lift its ban on exercising the right of collective self-defence, or aiding an ally under attack.
Besides exports deemed to promote global peace, transfers overseas of Japanese defence equipment contributing to Japan's security could be approved, Takeshi Iwaya, head of the Liberal Democratic Party's (LDP) security panel, told reporters.
He was speaking after lawmakers from the LDP and junior coalition partner New Komeito held a first meeting to discuss a draft on the policy change.
Exports to countries that are directly involved in international conflicts would remain banned, Iwaya said.
Japan drew up the "three principles" on arms exports in 1967, banning sales to countries with communist governments or those involved in international conflicts or subject to United Nations sanctions.
But the rules over time became tantamount to a blanket ban on exports - with some exceptions - and on the development and production of weapons with countries other than the United States.
"By allowing only those exports that help improve safety of our nation through strict screening, we can make our security tighter," Iwaya said.
"We can also contribute to building up international peace by transferring defence equipment as well."
Domestic media have reported that Abe's cabinet aims to approve the new policy by the end of the month.