* Defence Minister to break ground on base on westernmost island
* Radar station, near disputed islets, risks raising tension with China (Adds comment from Chinese government, paragraphs 14-15)
By Nobuhiro Kubo
TOKYO, April 18 (Reuters) - Japan is sending 100 soldiers and radar to its westernmost outpost, a tropical island off Taiwan, in a deployment that risks angering China with ties between Asia's biggest economies already hurt by a dispute over nearby islands they both claim.
Japanese Defence Minister Itsunori Onodera will break ground on Saturday for a military lookout station on Yonaguni, which is home to 1,500 people and just 150 km (93 miles) from the disputed Japanese-held islands claimed by China.
The mini-militarization of Yonaguni - now defended by two police officers - is part of a longstanding plan to improve defence and surveillance in Japan's far-flung frontier.
Building the radar base on the island, which is much closer to China than to Japan's main islands, could extend Japanese monitoring to the Chinese mainland and track Chinese ships and aircraft circling the disputed crags, called the Senkaku by Japan and the Diaoyu by China.
"We decided to deploy a Ground Self-Defense Force unit on Yonaguni Island as a part of our effort to strengthen the surveillance over the southwestern region," Onodera said this week. "We are staunchly determined to protect Yonaguni Island, a part of the precious Japanese territory."
The 30 sq km (11 sq mile) backwater - known for strong rice liquor, cattle, sugar cane and scuba diving - may seem an unlikely place for Prime Minister Shinzo Abe to put boots on the ground.
But Yonaguni marks the confluence of the Japanese defence establishment's concerns about the vulnerability of the country's thousands of islands and the perceived threat from China.
The new base "should give Japan the ability to expand surveillance to near the Chinese mainland," said Heigo Sato, a professor at Takushoku University and a former researcher at the Defense Ministry's National Institute for Defense Studies.
"It will allow early warning of missiles and supplement the monitoring of Chinese military movements."
Japan does not specify an enemy when discussing its strategy to defend its remote islands. But it makes no secret that it perceives China generally as a threat - a giant flexing its growing muscle and becoming an Asian military power to rival Japan's ally, the United States, in the region.
Japan, in National Defense Programme Guidelines issued in December, expressed "great concern" over China's rapid military buildup, opaque security goals, its "attempts to change the status quo by coercion" in the sea and air, and such "dangerous activities" as last year's announcement of an air-defence identification zone.
Japan's remote-island strategy, set out in the guidelines, is to "intercept and defeat any invasion by securing maritime supremacy and air superiority" with swift deployments supplementing troops positioned in advance.
"Should any remote islands be invaded, Japan will recapture them. In doing so, any ballistic missile or cruise missile attacks will be dealt with appropriately."
A spokeswoman for China's Ministry of Foreign Affairs, asked about her reaction to Japan's build-up on Yonaguni, said Japan's neighbours were closely watching its defence policy.
"We hope the Japanese side can draw lessons from history and act in a way that is conducive to peace and stability," the spokeswoman told a regular briefing in Beijing.
Yonaguni, at the western tip of Japan's 3,300-km (2,000-mile) southwestern island chain, is practically within sight of the disputed rocks that are the feared flashpoint of Japan's island strategy, which could draw the United States into a fight.
Onodera's groundbreaking ceremony comes four days before President Barack Obama lands in Tokyo for a summit with Abe, the first state visit by a U.S. president in 18 years.
Japanese and Chinese navy and coastguard ships have played high-stakes cat and mouse around the disputed islets since Japan nationalised the formerly privately owned territory in September 2012. Japanese fighter jets scrambled against Chinese planes a record 415 times in the year through to March, up 36 percent from the previous year, the Defense Ministry said last week.
Tapping such concerns, Abe raised military spending last fiscal year for the first time in 11 years.
He is bolstering Japan's capability to fight for islands with a new marine unit, more longer-range aircraft, amphibious assault vehicles and helicopter carriers. Although the country's landmass is smaller than California, its thousands of islands give it nearly 30,000 km (18,600 miles) of coastline to defend.
Tight fiscal constraints, however, mean Japan can't keep pace with China's yearly double-digit military budget increases.
The people of Yonaguni, where Abe wants to station 100 troops and perhaps as many family members within two years, have mixed feelings about their imminent role in facing off against China.
"Opinion is split down the middle," Tetsuo Funamichi, the head of the island's branch of the Japan Agricultural Association, said by telephone. "It's good for the economy if they come, but some people worry that we could be attacked in an emergency."
Takenori Komine, who works in an island government office, said it was a risk worth taking if it meant reviving an outpost of Japan that has been in decline since a brief postwar boom.
At that time, U.S.-occupied Yonaguni's proximity to Taiwan made it an entry point into Japan for smuggled food and clothing from Hong Kong. Since the end of World War Two, the island's population has withered by some 90 percent. Average income of about $22,500 a year is a fifth below the national average.
"We are hopeful that the arrival of the young troops will bolster local consumption," Komine said.
But Yonaguni's mainstays, beef and sugarcane, are in the crosshairs of trade negotiations. Abe is trying to defend Japan's high tariffs on them but has recently agreed to beef tariff cuts for Australia and is under strong pressure to do the same for the United States before Obama's visit, as part of broad talks on an ambitious Trans-Pacific Partnership (TPP) trade pact.
"If the TPP includes sugar, this island is finished," said Funamichi of the agricultural co-op.
And a sharply falling population on Yonaguni would have security implications, a government official said.
"It's not good from the perspective of securing our territory," said the official in Tokyo. "If people don't live there, you could lose your claim to effective control." ($1 = 102.2750 yen)
(Writing by Tim Kelly, additional reporting by Megha Rajagopalan in BEIJING; Editing by William Mallard and Robert Birsel)