The US military, which has been looking for the sailor since early this month, informed Japan early on Saturday that he was found in the military hub of Yokosuka near Tokyo, Kyodo News said, quoting police sources.

The report said the sailor's credit card was found on Wednesday in a parked taxi in which the 61-year-old driver was stabbed to death with a kitchen knife, which penetrated his neck so deeply that it reached its lung.

A local police spokesman declined comment, directing queries to the US military, where a spokesperson could not immediately be reached.

The US Navy earlier condemned the incident and said it would fully cooperate in the probe.

Japan has had tense relations recently with the US military after a series of alleged crimes linked to troops.

More than 40,000 US troops are stationed in Japan under a security alliance with the close US ally, which has been pacifist since defeat in World War II.

Japanese media said that the sailor, 22, had been missing since the beginning of the month. He was serving on the US Navy's 7th Fleet in Yokosuka.

The city, some 65 kilometres south of the Japanese capital on the mouth of Tokyo Bay, is the biggest US naval hub in the Pacific.

Reports have said that the slain driver was suspected of arguing with the customer over the fare, which police said was about 17,000 yen (S$235).

Police found about 62,000 yen in cash in a bag left in the driver's seat and tens of thousands of yen in Mr Takahashi's pocket, according to Kyodo News.

The incident comes a month after a furore on the southern island of Okinawa, the biggest US military hub in Japan, after a US Marine was arrested for allegedly raping a 14-year-old girl.

Japanese prosecutors decided not to press charges as the girl did not want to pursue the high-profile case. The US military, however, is still considering action against the Marine.

Residents of Okinawa have called a rally at which they hope to draw more than 10,000 people on Sunday to protest crimes and accidents by US soldiers and military personnel. -- AFP