A plan to build a synthetic diamond plant in the United States is a prime prospect in Japan's $550-billion investment package, as the allies push to expand production of a material vital to chip and high-precision manufacturing, sources said.

It could be among the first batch of projects, details of which Reuters is reporting for the first time, set to be unveiled ahead of a U.S. visit by Japanese Prime Minister Sanae Takaichi planned as early as March, the two sources said.

Both declined to be identified as the matter is private.

"The United States wants to accelerate domestic production of synthetic diamonds," one of the sources said. "By involving Japanese companies, Washington hopes to build a U.S.–Japan supply chain that does not rely on China."

China's recent moves to put export controls on some artificial diamonds has underscored the strategic importance of the material, most of which is now produced in China.

The synthetic diamond project involves Element Six, part of De Beers Group, the world's leading diamond company, the source added.

The news comes as Japan accelerates efforts to finalise projects under the initiative agreed as part of Tokyo's deal with Washington to lower tariffs on Japanese exports.

Its investment package would include equity, loans and loan guarantees from state-owned agencies Japan Bank for International Cooperation (JBIC) and Nippon Export and Investment Insurance (NEXI).

At the same time, President Donald Trump is raising tariffs on South Korea, which it accuses of dragging its feet on adopting a similar agreement reached last year.

Also likely to figure in the first batch of projects is a large-scale power-generation project, involving Japanese industrial conglomerate Hitachi Ltd 6501.T, the sources said.

The deal value of the projects was not immediately known.

Japan's trade ministry declined to comment on the projects under discussion, saying it was in talks with the United States to swiftly put together the project pipeline, but nothing had been decided.

Element Six said there were no formal agreements currently in place regarding any potential projects. Hitachi said it was engaged in discussions with the Japanese and U.S. governments, but declined further comment.

The U.S. commerce department and its Japan embassy did not immediately respond to a request for comment outside business hours.

A major infrastructure project involving construction of a data centre linked to SoftBank Group 9984.T also remains a finalist, Reuters reported this month.

One of the hardest known materials, diamond is crucial to high-precision manufacturing.

It is used for ultra-fine polishing of semiconductors, machining hard metals and ceramics in quantum devices, and dissipating heat in advanced electronic systems.

Artificial diamonds also have dual-use military applications, in turning out munitions and radar components.

-Tamiyuki Kihara and Makiko Yamazaki/Reuters