Prime Minister Junichiro Koizumi and visiting Mexican President Vicente Fox agreed Tuesday to set up a study group to examine the possibility of a free-trade agreement between the two countries.

Fox proposed that the two countries discuss a free trade agreement, saying that an FTA is important to further promote ties and strengthen the strategic alliance between Japan and Mexico, a Foreign Ministry official said.

In response, Koizumi acknowledged the importance of a comprehensive study of bilateral ties, including the possibility of signing an FTA, and proposed the creation of a study group including government officials, scholars and private sector representatives, the official said.