Japan and Australia are expected to begin negotiations on a free-trade agreement early next year, according to diplomatic sources.
The two sides agreed, in vice-ministerial talks Tuesday in Canberra, to draw up a joint report by the end of the year that is expected to recommend starting talks on a bilateral trade pact.
A formal agreement on starting the talks is likely be reached when Prime Minister Shinzo Abe and his Australian counterpart, John Howard, meet at the East Asian summit scheduled for December in the Philippines.