Reuters cited Mr Yoshihiko Noda Japanese Prime Minister said after talks that showed the deepening bonds between Asia two biggest economies that Japan and China agreed to start formal talks early next year on a free trade pact that would also include South Korea.

Japan also said it was looking to buy Chinese treasury debt, and the two governments agreed to enhance financial cooperation.

Mr Noda told reporters after his meeting with Premier Mr Wen Jiabao that "On a free trade agreement among Japan, China and South Korea, we've made a substantial progress for an early start of negotiations."

Mr Wen told Mr Noda at the meeting that "China is willing to closely coordinate with Japan to promote our two countries' monetary and financial development, and to accelerate progress of the China-Japan-Republic of Korea free-trade zone and East Asian financial cooperation."

But the regional trade negotiations could also compete for attention with Washington push for a Trans-Pacific Partnership after Japan said last month it wants to join in the talks over the US proposal.

(Sourced from Reuters)