Thai Prime Minister Thaksin Shinawatra's recent unexpected proposal for a free-trade agreement has Japanese policymakers tearing their hair out.

They are now pondering how to reply to the FTA proposal when Prime Minister Junichiro Koizumi meets with Thaksin again next month during a tour of several Southeast Asian countries.

When Thaksin met Koizumi in Tokyo on Nov. 19 during his first official visit since taking office in February, he apparently caught Japanese government officials off balance with an unexpected proposal to conclude an FTA.

Koizumi gave an evasive reply at the meeting, although he agreed with the Thai leader on the need to strengthen overall bilateral economic relations.

But according to government sources, Koizumi will not be able to keep pussyfooting around. He will have to reply to Thaksin's proposal formally -- and with greater clarity -- when the two meet again in Bangkok next month, the sources said.

"Unless Koizumi gives a clear Japanese reply to the FTA proposal next time, it may be impolite diplomatically," said a senior Japanese government official, on condition of anonymity.

Another senior government official, who also asked not to be named, said, "Japan may have to consider the Thai proposal seriously for an economically strategic reason, now that China and ASEAN have agreed to open FTA negotiations."

At a summit in Brunei in early November, China and the Association of Southeast Asian Nations agreed to launch FTA negotiations, fueling concerns among Japan's exporters and multinational conglomerates that their country might be left behind amid a rising tide of regional and global FTAs.

Thailand is a key ASEAN member. The 10-member ASEAN also includes Indonesia, Singapore, Malaysia, the Philippines, Brunei, Vietnam, Laos, Cambodia and Myanmar.

But there seems to be a consensus among Tokyo officials that it is politically impossible to open FTA negotiations with Thailand, at least in the foreseeable future.

That's because the Southeast Asian country is a major exporter of agricultural goods, especially that most politically sensitive of products for Japan -- rice.

Two-way trade between Japan and Thailand in 2000 came to 2.61 trillion yen, with Japanese exports totaling 1.47 trillion yen and imports totaling 1.14 trillion yen, according to the Ministry of Economy, Trade and Industry.

Of those imports, 238 billion yen -- about 20 percent -- was foodstuffs, including meat, fish, rice, vegetables and fruit.

Japan hopes to sign its first FTA, with Singapore, early next year. In stark contrast with Thailand, Singapore produces almost no farm products, and agriculture accounts for a negligible share of its trade with Japan.

Despite being the only major industrialized nation to not have a free trade pact, Japan is cautious, even timid, about concluding an FTA because of the politically powerful domestic farm lobby, which staunchly opposes any further liberalization of agricultural markets.

Thailand has joined the growing ranks of Japanese trading partners who have proposed -- formally or informally -- FTAs with the world's second largest economy. In addition to Singapore, the list includes Mexico, Canada, Chile, Brazil, South Korea, Taiwan, Australia, New Zealand and Switzerland.

Japan has yet to agree to negotiate with any of these, going only so far as to call for studies on FTA-related issues at the private-sector level with some of the nations.

The only exception is Mexico, with which Japan in September launched a joint study panel of government officials and private-sector experts on ways to strengthen bilateral economic ties, including a possible FTA.

"When Koizumi meets with Thaksin next month, he may have to pay lip service by agreeing to start some joint study, probably at the private-sector level, on the possibility of concluding an FTA," a senior trade official said. "But Koizumi will not go beyond that."