Japan said today that it will sign a free-trade pact with Malaysia next week that will abolish tariffs on nearly all goods and products within a decade.

"Our government has decided to sign an economic partnership agreement with the government of Malaysia," Japan said in a statement here ahead of Wednesday's inaugural East Asian Summit.

The signing of the deal and a separate joint statement are scheduled for next week, when Japanese Prime Minister Junichiro Koizumi meets with Malaysian Prime Minister Abdullah Ahmad Badawi on the sidelines of the summit.

The deal will see protectionist tarrifs on Japanese vehicles ended completely within 10 years.

This will expose national carmaker Proton to further competition, a sore point with former premier Dr Mahathir Mohamad, who is the driving force behind the establishment of Proton and now its adviser.

The inaugural East Asia Summit will bring together leaders of the 10-member Association of Southeast Asian Nations (Asean) as well as Australia, China, India, Japan, New Zealand and South Korea.

Japan and Malaysia reached a broad agreement over the free-trade deal in May after launching official negotiations in January 2004.

Top source of import

The agreement will abolish tariffs on nearly all industrial goods and agricultural products within a decade.

Japan is Malaysia's third-biggest export market and its top source of imports. Major Japanese exports to Malaysia include semiconductors, general machinery and steel.

Malaysia's top exports to Japan are machinery equipment, lumber, natural gas and other energy products.

The agreement will be Japan's third free-trade pact. Its first-ever free-trade agreement took effect in late 2002 with Singapore and a second accord went into force in April with Mexico.

Japan has reached similar, broad agreements with Thailand and the Philippines and is in ongoing negotiations with South Korea, Indonesia and the Association of Southeast Asian Nations.