Prime Minister Junichiro Koizumi and visiting Indonesian President Megawati Sukarnoputri have agreed to set up a working group tasked with studying the possibility of concluding a bilateral free-trade agreement.
"(Japan) hopes to make efforts toward the conclusion of an FTA," Koizumi was quoted as saying by Japanese officials.
In a joint statement announced after their summit Tuesday, the leaders agreed to study the scope of a possible FTA, trade liberalization in goods and services, as well as investment liberalization.
The study group will also discuss whether "sensitive items" in areas such as farming, fishing and forestry should be excluded from the FTA. Japan has concluded only one FTA, with Singapore. It expects to sign its second in October, with Mexico, and has set up working groups to study accords of this kind with Thailand, Malaysia and the Philippines.
Megawati left Tokyo Wednesday for Vietnam, the next leg of her overseas trip.