TOKYO (Reuters) - Japan said on Tuesday it would give Afghanistan up to $5 billion in new aid, a move Tokyo hopes will improve strained security ties with Washington ahead of U.S. President Barack Obama’s visit this week.

U.S. President Barack Obama speaks at a Democratic National Committee fundraiser in San Francisco, California October 15, 2009. REUTERS/Kevin Lamarque/Files

Japan and the United States also agreed to set up a working group to examine plans to relocate a U.S. military base on Japan’s southern island of Okinawa, a feud over which had raised concerns about the security alliance between the world’s two biggest economies.

It is the first big test of ties between Washington and a new Japanese government that wants a more equal relationship with its closest security ally.

Hatoyama is expected to present the aid package to Obama, who is reviewing U.S. strategy for Afghanistan, at a summit on Friday in Tokyo. The aid would be delivered over five years.

The aid package, which comes ahead of a planned halt to Japan’s naval refuelling mission in support of U.S.-led operations in Afghanistan, will focus on civilian steps including job training for former Taliban fighters.

Tokyo and Washington have said the row over the relocation of the Futenma air base would not be the main focus of the talks on Friday, but Hatoyama is under pressure to make a decision soon.

Under a 2006 agreement, the Futenma Marine base is to be closed and replaced with a facility built in a remoter part of the island by 2014 as part of a realignment of the 47,000 U.S. military personnel in Japan.

But Hatoyama said before his party’s landslide August election victory that the base should be moved off the island, where many residents resent what they see as an unfair share of the burden of the U.S. military presence in Japan.

In an interview with Japanese broadcaster NHK, Obama said he understood the need for Tokyo to reexamine the reorganisation of U.S. bases given a new government had taken office.

But he added: “I am confident that once the review is completed, they will conclude that the alliance that we have, the basing arrangements that have been discussed, all of these things serve the interest of Japan and they will continue.”

TOUGH DECISION

Replacing Futenma is a prerequisite for reorganising U.S. troops and reducing the burden on Okinawa by moving up to 8,000 Marines to Guam, partly at Japan’s expense.

Hatoyama faces a tough decision as he tries to maintain the support of the Okinawan people without upsetting Washington.

“If the new government approves the ... base plan as it was agreed under the previous government, that would be tantamount to an act of suicide, so I don’t think the Hatoyama government will choose that path,” Yoichi Iha, the mayor of Ginowan city where the Futenma base is located, told a news conference.

A survey by the mass circulation Yomiuri newspaper showed on Tuesday that 63 percent wanted Japan to implement the plan to relocate the Futenma base as planned or with minor changes.

But 70 percent of Okinawa residents in a poll this month by the Mainichi newspaper said they wanted the base off the island.

Residents of Okinawa, 1,600 km (1,000 miles) south of Tokyo, have long resented the bases which they associate with crime, noise pollution and accidents.

In the latest incident, U.S. forces detained a soldier who was driving a car that may have been involved in a suspected hit-and-run case in which a Japanese resident in a village on the island was killed over the weekend, NHK reported on Tuesday.

Hatoyama said that if the reports were true, then he wanted the soldier handed over to Japanese authorities soon.

“Whenever accidents like this happen, I am driven to think that it is necessary to decrease the burden of the people in Okinawa,” he told reporters.

Hatoyama has said he would not rush a decision on Futenma, adding Obama would be keen to discuss Japan’s aid to Afghanistan.