Japan will lend around ¥5.3 billion to East Timor, the first yen loans to the country, to develop its road infrastructure.
The agreement was reached between Prime Minister Yoshihiko Noda and East Timor Prime Minister Xanana Gusmao during talks Monday in Tokyo.
At a news conference before the meeting, Gusmao thanked Japan for the financial assistance, noting the funds will be used to upgrade a road connecting Dili and the second-largest city, Baucau, to international standards.
The "high-quality infrastructure," he said, will "benefit our people for many decades to come. We are very grateful."
Saturday's presidential election in East Timor was also discussed during the meeting, with Noda noting he heard the voting was peaceful, which he said is a "sign of democracy."