Australia says it has accepted a Japanese company's bid for a lucrative and hotly contested contract to build Australian naval vessels, expected to be worth 10 billion Australian dollars ($6.5 billion).

The Australian government aims to sign binding, commercial contracts with Mitsubishi Heavy and the Japanese government in 2026.

Japan has struggled to export cutting-edge defense equipment. However, past disappointments have been turned on their head after Japan won selection for a lucrative Australian frigate requirement worth up to US$6.5 billion.