Japan and Australia have reached a broad agreement on how to deal with farm products as they continue negotiations on a bilateral free-trade agreement, government sources said Sunday.

Under the deal, Japan will be allowed to retain high tariffs on imports of some of its most "sensitive" farm goods in exchange for accepting a certain amount of those products from Australia at low customs duties, the sources said.

Rice, however, will be excluded from the new two-stage tariff system, they said.