Japan will next year provide its first-ever multi-million dollar cash grant to the Marshall Islands.
It has approved a 2.2 million US dollar grant to support energy needs.
The agreement requires the Marshalls to come up with an additional 1 point 1 million dollars to support the fund.
The new grant follows consistent Marshall Islands votes in support of Japan at the International Whaling Commission, backing for Japan's bid for seat on the UN Security Council, and a state visit to Japan by the Marshalls' President earlier this year.
Since the 1980s, all large Japan grants have been provided in the form of construction projects, such as docks, roads, and a new hospital, or for fisheries development activities.
Japan is the third largest aid donor to the Marshalls behind the United States and Taiwan.