*JAPAN IS SAID TO MULL RAISING DEFENSE SPENDING TO 3.5% OF GDP
*JAPAN SAID TO EYE REACHING 3.5% SPENDING TARGET IN MID-TERM
*JAPAN TOLD US OFFICIALS IT WILL RAISE DEFENSE SPEND, PEOPLE SAY
*JAPAN IS SAID TO MULL RAISING DEFENSE SPENDING TO 3.5% OF GDP
*JAPAN SAID TO EYE REACHING 3.5% SPENDING TARGET IN MID-TERM
*JAPAN TOLD US OFFICIALS IT WILL RAISE DEFENSE SPEND, PEOPLE SAY