Taiwanese President Ma Ying-jeou had two things to brag about in his National Day address last month: One was a landmark trade pact signed in June 2010 with China, the island's largest trading partner, while the other was significantly improved relations with its second-largest trading partner, Japan.

Japanese investment in Taiwan exceeded $444 million last year, the highest level since Ma first took office in 2008, and from this January to September rose to its highest point in the past five years.

With trade prospering, Tokyo and Taipei signed an investment agreement in September last year allowing for greater freedom of bilateral economic exchanges — an important step closer to inking a free-trade pact.