The cooperation will not be limited to repairing U.S. naval ships at Japanese private shipyards but will also envision the co-development and co-production of munitions, planes and ships in the future.
The leaders are set to launch a coordinating body to discuss how to implement the vision.
The U.S. sees huge potential to "integrate" Japan into America's defense industrial base, the official said.
The Japanese Embassy in Washington declined to comment for this story.
The unprecedented move to mesh the two allies' defense industrial capabilities comes as China ramps up production of ships, submarines and planes, supported by a powerful industrial base.
China is the world's largest shipbuilding nation, and its defense budget is set to grow by 7.2% this year -- well above the economic growth target of "around 5%."
The U.S. industrial base, by contrast, is hamstrung by bottlenecks as a consequence of shipyard closings after the end of the Cold War and chronic labor shortages. Symbolically, the Department of Defense said it will order just one Virginia-class nuclear-powered attack submarine in fiscal 2025 -- down from the two-per-year pace of recent years, because of capacity constraints at U.S. shipyards.
The Pentagon's fiscal 2025 budget request grew just 0.9% on the year.
The idea is to tap allied manufacturing capabilities, starting with Japan, where the largest overseas contingent of U.S. forces is based.
"We see Japan as an underutilized resource," the official said. "Japan's manufacturing as a percentage of GDP [gross domestic product] is twice what the United States' is. Japan has a very impressive industrial base, but it's underweighted on the defense side."
The use of Japan's defense industrial base will begin with ship repairs. At their summit, Biden and Kishida are expected to formalize the process of performing maintenance, repairs and overhauls on U.S. Navy warships at Japanese private shipyards.
The U.S. Navy has already experimented with ship repairs at Mitsubishi Heavy Industries' Yokohama Dockyard and Machinery Works -- the USS Milius missile-guided destroyer in 2019 and the USNS Big Horn replenishment vessel this year. Located in Kanagawa prefecture near Tokyo, the Yokohama shipyard is close to the Navy's Yokosuka base and will likely serve as the flag-bearer of the cooperation.
Down the road, other Japanese shipyards that currently do work for the Japanese Maritime Self-Defense Force, such as Mitsubishi Heavy shipyards in Nagasaki and Tamano, as well as a Japan Marine United shipyard in Kure -- all located in western Japan -- are seen as candidates.
The repairs will initially be limited to the two dozen ships forward-deployed to Japan. This is because American law generally prohibits naval ships home-ported in the U.S. from being overhauled, repaired or maintained in an overseas shipyard.
The American official who spoke to Nikkei Asia said that eventually, congressional action may be required to expand the operations to allow Japanese yards to service U.S.-based ships as well. This would help ease maintenance bottlenecks at American yards and allow ships to return to operation faster.
Analysts say that in a potential future conflict between the U.S. and China in the Taiwan Strait, it would be crucial for the U.S. Navy to be able to perform quick repairs in Japan so that ships can return to battle, rather than spending weeks traveling back to the U.S.
Meanwhile, co-production of assets would likely begin with munitions. The U.S. is critically short of munitions, having to provide them to both Ukraine and Israel. Co-producing munitions with the Japanese defense industry will help backfill stockpiles for the Indo-Pacific.
RAND Corp. senior political scientist Jeffrey Hornung, the Japan lead for its National Security Research Division, said that being able to manufacture munitions and keeping them in Japan would be significant.
"To have stockpiles and supplies and parts in Japan, so that if a conflict broke out we don't have to haul all these things over, would be a huge benefit for the U.S.," he said.
Hornung said it will crucial to frame the collaboration in a way that both sides see it as a win-win: "To the American side, it has to be explained that this isn't about losing jobs, that you're not losing contracts, it reduces the logistics and our allies are picking up the slack."
Meanwhile, for the Japanese side, the increased work should encourage Japanese defense companies to invest in capacity, he said. While Japan has announced that it will increase defense spending over the next five years, bringing defense spending up to 2% of gross domestic product from the current 1%, that has not translated into massive investments. "There has been this concern that after the five years of the defense increases, that maybe we're going to go back to normal. There's been a hesitance," Hornung said.
An agreement on industrial cooperation would give Japanese defense contractors "more certainty that [demand] will live beyond the Japanese defense-budget increases and that they're not going to be left with excess capacity in a couple of years," he said.