Japan on Friday said it had picked Mitsubishi Heavy Industries (MHI) to lead the development of a new stealth fighter jet that Japan wants operational by the mid-2030s to counter advanced Chinese aircraft.

"We awarded the prime contract to Mitsubishi Heavy," a ministry of defence spokesman said.

The fighter jet project, which is expected to cost about $40 billion, comes at an opportune time for MHI, as the company is pulling back from plans to build its SpaceJet regional passenger aircraft as coronavirus travel curbs leave airlines with little cash to buy new planes.

The decision was expected because MHI is Japan's only jet fighter manufacturer, and no other company bid for the contract. Other suppliers and partners will most likely be identified by the end of the year.

U.S. firms that have expressed interest in joining the project include F-35 stealth fighter maker Lockheed Martin Corp , F-18 Super Hornet builder Boeing Co and Northrop Grumman Corp from the United States. British companies include BAE Systems Plc and jet engine maker Rolls Royce Holdings Plc.

In its budget request for the year starting in April, Japan's defence ministry has asked for about $730 million to fund research and development of the proposed fighter jet, referred to as the F-X or F-3.

Japan's air force flies about 200 Boeing F-15 jets and is replacing squadrons of decades-old F-4 fighters with F-35s. The new plane will succeed the F-2, a derivative of the F-16 Fighting Falcon jointly developed by MHI and Lockheed Martin more than two decades ago.