* Talks focus on two Atago-class destroyers
* Japan needs upgrade to use interceptor being co-developed with US
* Japan is U.S. top partner on missile defense
By Jim Wolf
WASHINGTON, Aug 15 (Reuters) - The United States and Japan are discussing system upgrades for a pair of Japanese destroyers to boost defenses against a ballistic missile attack, an executive at the Pentagon's top contractor said Wednesday.
The potential multimillion-dollar updates to two Atago-class guided-missile destroyers would provide cutting-edge "Aegis" ballistic missile defenses equivalent to those being added to U.S. Navy ships, said Nick Bucci, who heads such maritime programs at Lockheed Martin Corp.
Japan, rattled by North Korean nuclear arms and ballistic missile tests, has emerged as the most important U.S. partner in crafting a layered shield against missiles of all ranges and in all phases of flight.
The United States has been spending roughly $10 billion a year on the overall project, a reflection of concern chiefly about North Korea and Iran.
Lockheed Martin's Aegis combat system weaves in radar, computers, software, displays, weapons launchers and weapons to defend against a range of surface, aerial and underwater threats.
Named for the mythological shield of Zeus, the Aegis system is to be deployed ashore in Romania and Poland starting around 2015 to defend Europe from ballistic missile threats from countries such as Iran, as well as on a growing number of U.S. ships.
Japan decided in 2003 to upgrade all four of its Aegis-equipped Kongo-class destroyers to be capable of shooting down ballistic missiles using Raytheon Co Standard Missile-3 interceptors.
The work now under discussion would modernize the Aegis systems aboard the Japan Maritime Self-Defense Force's Atago and Ashigara to a more advanced setup than the Kongo-class, Bucci said in a telephone interview with Reuters. He declined to cite a potential value for such upgrades other than millions of dollars.
Included would be new brains for the Aegis system's radar, designed to be able to thwart ballistic missiles at the same time as defend against other airborne attacks.
Also included would be new computing infrastructure, displays, consoles and sensors, Bucci said from Huntsville, Alabama, where he was attending an Army-supported conference on space and missile defense.
With such a modernization, the Atago and Ashigara would be capable of firing an updated SM-3 missile that Japan is co-developing with the United States. Kongo-class destroyers would need a separate upgrade of their own to achieve this.
The updated SM-3 interceptor, known as Block IIA, is a cornerstone of the penultimate phase of President Barack Obama's roadmap for defending NATO'S European territory against missile attack.
The interceptor's larger rocket motors and advanced "hit-to-kill" warhead are meant to defend a greater area. The warhead works by colliding with its target. The program is on track for a 2018 delivery, Raytheon, the U.S. partner, said in March. Mitsubichi Heavy Industries Ltd is the Japanese contractor.
The cooperative research effort on the updated interceptor been carried out under a U.S.-Japanese memorandum of agreement signed shortly after North Korea's surprise Aug. 31, 1998, launch of a three-stage Taepo Dong-1 missile that overflew Japan before falling into the Pacific.
Bucci in the interview said he was "pretty sure" that South Korea, which has three Aegis-equipped destroyers, has been talking to the U.S. Navy about similar ship upgrades to ballistic missile defense configuration.
The U.S. Defense Department and the Navy had no immediate comment on any such possible programs for Japan or South Korea.
The U.S. Navy's own fleet of ballistic missile defense-capable Aegis ships is schedule to grow from 24 at the end of fiscal 2011 to 36 by the end of fiscal 2018, according to an August 10, 2012, report by the nonpartisan Congressional Research Service, a Library of Congress arm.