TOKYO - Prime Minister Dr Mahathir Mohamad said today his country hoped to seal its first bilateral free trade agreement (FTA) with Japan, a Japanese official said.

Mahathir made the remark at a meeting with Economy, Trade and Industry Minister Takeo Hiranuma.

The veteran prime minister, who has pledged to resign next October, said he would like to propose an FTA early next year, according to the Japanese official.

Mahathir noted careful consideration was needed of sensitive areas such as farm products, but said he hoped the two nations would reach an accord swiftly, the official said.

Hiranuma was quoted as saying Japan "will make efforts" to reach a pact.

Second largest partner

Bilateral trade last year stood at RM99 billion. Japan is Malaysia's second most important trading partner after the United States.

Last year, Japan provided 17.2 percent of Malaysia's imports and took 13.3 percent of its exports.

Japan is also the second largest foreign investor in Malaysia after the United States.

Tokyo signed its first FTA with Singapore in January, which came into effect in November.

It excludes the sensitive issue of agriculture but 99 percent of bilateral trade and 94 percent of Singapore's exports to Japan are duty free.

Japan is also preparing to start FTA talks with the Association of Southeast Asian Nations (Asean).

Asean comprises Burma, Brunei, Cambodia, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand and Vietnam. AFP