Japan wants to develop a stealth fighter domestically, rejecting designs from Lockheed Martin Corp. and Boeing Co. in the United States and Britain's BAE Systems PLC, three sources with knowledge of the program said.

That would put Japan's leading defense contractor, Mitsubishi Heavy Industries, in the lead for a military contract worth more than $40 billion (¥4.3 trillion). The company has not submitted a design for the next-generation jet but developed Japan's stealth fighter technology demonstrator, the X-2, in 2016.

"Japan's stealth designs have performed well in tests so far," said one of the sources, who has knowledge of discussions on the proposed plane, which is referred to as the F-3 or F-X.