The European Union on Wednesday reached a basic agreement to exclude three key Japan Railway units from the World Trade Organization's government procurement accord, according to an EU diplomatic source.

The EU decision, expected to be finalized at a ministerial meeting on Tuesday, may generate some momentum in moving forward its negotiations on a free trade agreement with Japan.

The WTO rule requires an international competitive bid for government procurement worth above certain thresholds. Japan had requested that the three JR units — East Japan Railway Co., Central Japan Railway Co. (JR Tokai) and West Japan Railway Co. — be excluded from application of the rule.

The EU had lodged an objection to Japan's request.

JR East, JR Tokai and JR West are among the seven operators that emerged from the 1987 breakup of a national railway service. The Japanese government had sold its stakes in the three companies by 2006.