Shinji Higuchi, a leading SFX director whose work includes the Gamera series, will helm Lorelei, a $11.2m (Y1.2 bn) production set in a Japanese submarine in the closing days of World War II.

Veteran Koji Yakusho (Shall We Dance', Doppelganger) will co-star with TV drama sensation Satoshi Tsumaoki. Fuji TV and Toho are among the investors, with Toho set to distribute in 2005.

Based on a story by Higuchi and best-selling suspense novelist Harutoshi Fukui, Lorelei tells of a Japanese submarine carrying a German secret weapon that the commander decides to use against the Americans. Fukui published a novel developed from the story last December. The executive producer is Chihiro Kamiyama, whose credits include this year's record-smashing hit Bayside Shakedown 2.

Lorelei will be the first Japanese film set in a submarine in 46 years. In addition to Higuchi's skills with effects, the film will make use of a full-size replica to be built in the Toho studio, as well as a smaller model for water scenes.

Japanese films set in World War II have become more common of late, including Masahiro Shinoda's drama Spy Sorge and Kazuki Omori's T.R.Y, both espionage dramas filmed largely in China. War action films, however, have become rare since a spate marking the 50th anniversary of the end of World War II in 1995.