The U.S. and Japan will drastically bolster their military alliance to counter China's increased spending on arms development and North Korea's nuclear and missile program.
The U.S. has decided to support Tokyo's attempt to engage the country's strictly defensive military in what is called "collective self-defense," allowing it to send troops to an ally which is in some way under threat.
The agreement came in meetings on Thursday between U.S. Secretary of State John Kerry and Defense Secretary Chuck Hagel with their Japanese counterparts Fumio Kishida and Itsunori Onodera.
Japan's pacifist constitution, drawn up after its defeat in World War II, rules out collective self-defense as an excuse for military adventures overseas, but the rightwing Shinzo Abe administration is seeking to revise it.
The two countries also agreed to revise by next year bilateral defense cooperation guidelines that clearly define the roles of American and Japanese troops.
The guidelines, which were first drafted in 1978 for fear of an invasion by Soviet forces, were revised in 1997 to prepare for an emergency on the Korean Peninsula.
The U.S. also agreed to deploy American P8 maritime reconnaissance aircraft, Global Hawk unmanned aerial drones and F-35B fighter jets capable of vertical take off and landing in Japan.
In a joint statement, the U.S. and Japan urged China to "adhere to international norms of behavior" and "improve openness and transparency in its military modernization."
They also called for greater sharing of intelligence information with other Asian allies. Japan and Korea failed to sign a military-information sharing pact at the last minute in 2012.
But the agreement sets alarm bells ringing since it means Japan can strengthen its armament, according to experts. "The U.S. recognizes Japan as an ordinary state that can exercise collective self-defense by revising its constitution, and in exchange it seems Tokyo agreed to boost its share of the upkeep of U.S. troops in Japan and flex more military muscle," said Jin Chang-soo at the Sejong Institute.