The Japanese government's National Space Development Agency (NASDA) signed the deal in the Kiribati capital of Tarawa to build the runway in Christmas Island for Japan's HOPE-X shuttle, the agency said.

The HOPE-X is an unmanned vehicle aimed at establishing major technologies to drastically cut the cost of space transport.

NASDA hopes to conduct the final flight experiment on HOPE-X in early 2004 with an H-2-A rocket to be launched from Tanegashima Space Centre in southern Japan.

Before the final test, NASDA will carry out a preparatory experiment in Christmas Island in the year from 2001 using a model sized one-quarter of the real shuttle and equipped with a jet engine.

"Following the completion of signing, we will start fixing necessary facilities and infrastracture for a high-speed flight experiment scheduled for the year from 2001," NASDA said in a statement.

"In conducting the project, we will minimise the impact on the environment," it said.

NASDA said it would lease land for the landing strip for 20 years, with the contract to be reviewed in seven, 12 and 16 years.

The Japanese agency would build its first overseas test strip by renovating an old runway there.

"The lease will be basically free of charge but we expect to spend 2.3 billion yen (21 million dollars) for the three years (to March 2002) for fixing roads and other necessary infrastructure," a NASDA spokesman said.

Kiribati has a population of around 80,000 with the bulk of them living in crowded south Tarawa, mostly on Betio's 116 hectares, smaller than most big city parks.

On November 20, 1943, during World War II, the US Marines landed on Betio in Kiribati to throw off the Japanese who had nearly completed an air strip there.

NASDA had to postpone the launch of the next-generation H-2-A rocket from this month to between April 2000 and March 2001 after a spectacular failure in a rocket project last year.

Space authorities had to explode a 24-billion-yen (229-million-dollar) H-2 rocket and satellite mid-air when the rocket's main engine failed in November 1999.

The explosion was the second successive failure in the costly H-2 rocket project after a 36-million-dollar satellite was lost in space despite a successful separation from the rocket in February 1998.

In a separate but equally embarrassing failure, Japan lost a 105-million-dollar astronomical satellite after its M5 rocket went awry after liftoff on February 10 this year.