MANILA - Japan's Self-Defense Forces fired a Type 88 anti-ship missile during a joint maritime exercise with US, Australian, and Philippine forces on Wednesday, hitting a decommissioned Philippine Navy ship in waters facing the disputed South China Sea.

The drill took place as Manila and Tokyo began talks on a potential defence equipment transfer, made possible by Japan's decision to scrap restrictions on military exports. Discussions include the possible early transfer of Abukuma-class destroyers and TC-90 aircraft to the Philippines, Japan's Defense Minister Shinjiro Koizumi said.

Philippine Defense Secretary Gilberto Teodoro and Koizumi witnessed the live missile firing on the ground, while Philippine President Ferdinand Marcos Jr watched the exercise from military headquarters in Manila via a live video feed.

The Philippine military said two Type 88 volleys were fired, hitting the BRP Quezon within six minutes of the launch. The strike took place about 75km off the coast of Paoay in the northern Philippines, which faces the South China Sea.

The live-fire drill was part of the annual war games held by Manila and Washington, known as Balikatan. Japan, Canada, Australia, France and New Zealand are joining as active participants for the first time, highlighting Manila's widening network of security partnerships.

More than 17,000 troops are taking part in this year's exercises, including around 1,400 from Japan and 10,000 from the United States.