Japan, China agree to restart FTA talks

BEIJING: Japan and China have agreed to restart talks soon on a free trade pact that would also include South Korea, Japanese Prime Minister Yoshihiko Noda said on Sunday after talks in the Chinese capital with Premier Wen Jiabao.

In another sign of growing inter-dependence between Asia's two biggest economies, Japan also said it was looking to buy Chinese government bonds.

"We discussed how we need to resume talks on a free trade pact among Japan, China and South Korea early next year, and we reached an agreement on that point," Noda told reporters after his meeting with Wen.

The announcement builds on an agreement between the three countries last month also to seek a trilateral investment treaty and finish studies on the proposed free trade agreement by the end of December so that they could start formal negotiations on the trade pact.

"China is willing to closely coordinate with Japan to promote our two countries' monetary and financial development, and to accelerate progress of the China-Japan-Republic of Korea free-trade zone and East Asian financial cooperation," Wen told Noda at the meeting.

But the regional trade negotiations could also compete for attention with Washington's push for a Trans-Pacific Partnership (TPP), after Japan said last month it wants to join in the talks over the US proposal.

Despite sometimes rancorous political ties between the two neighbours, Japan's economic fortunes are increasingly tied to China's economic growth and consumer demand. Wen told Noda that closer economic ties were in both countries' interests.

"The deep-seated consequences of the current international financial crisis continue to spread, and the complexity and severity of global and world developments have exceeded our expectations," Wen said.

"China and Japan both have the need and conditions to join hands more closely to respond to challenges and deepen mutually beneficial strategic relations." China has been Japan's biggest trading partner since 2009.

In 2010, trade between the two nations grew by 22.3 percent compared to levels in 2009, reaching 26.5 trillion yen ($339.3 billion), according to the Japan External Trade Organization.

In a statement issued after the two leaders' meeting, the Japanese government said it would seek to buy Chinese government bonds a tentative step toward diversification of Tokyo's large foreign exchange reserves that are believed to be mostly held in dollars.

But Japanese officials have stressed that Japan's trust in dollar assets remains unshaken. The statement given to reporters gave no details of when Japan might seek to buy the bonds, but Japanese officials said the scale would be small. China and Japan are also the world's first and second-biggest holders of foreign reserves.

Copyright Reuters, 2011