Health services provided by the hospital were badly reduced when the hospital was hit by a 7.9 earthquake and Tsunami waves on April 2, 2007.
Minister Haomae and Japanese Charge d' Affairs Akira Iwanade and Vice President of the Japan International Cooperation Agency (JICA) Mr Takase Kaneko officially signed the Exchange of Notes and the Grant Agreement during a brief ceremony at the Ministry of Foreign Affairs.
The ceremony marks the beginning of the SB$6.2 million project which will fund a new hospital complex comprising of a laboratory, Maternity ward, Male and Female ward, Delivery Department, Operation Unit, an Administrative Department and various medical equipment.
Minister Haomae said the assistance signifies the close relation between the two countries.
"This is clearly symbolized by the commitment through the investment of the grant of SB$6.2 by the government of Japan," he said.
Mr Haomae further stressed that the project is anticipated to improve the infrastructure of Gizo hospital and the medical welfare of people and visitors to Gizo and Western province at large.
The Japanese Government will remit funds for the actual construction of the hospital later in the year.
The Minister said the assistance compliments the CNURA government's policy of rural development which will improve the health standards of rural dwellers in Western Province.
Haomae thanked Mr Iwanade and officials of the Embassy of Japan in Honiara for their untiring efforts in ensuring the project is given due consideration by Japanese authorities.
The signing ceremony was witnessed by Minister of Health Johnson Koli, Minister of Infrastructure Development, Stanley Sofu, Western Premier Alex Lokopio and top government officials.