The agreement is intended to boost trade between Japan and India, which share a mutual concern about the growing economic clout of China. Within 10 years, tariffs will be abolished on 90% of Japanese exports to India and 97% of India's exports to Japan.

The Prime Minister of Japan, Naoto Kan, has said opening up the country to trade is a top priority. Japan's population is ageing rapidly and the economy is mired in deflation. Earlier this week, Japan was eclipsed by China as the world's second biggest economic power. Meanwhile South Korea is an increasingly formidable rival, using free-trade agreements to make its electronics and other sectors more competitive.

Japan's government is considering joining talks on the Trans-Pacific Partnership, a huge free-trade area around the Pacific rim. But it faces strong opposition from rice farmers, who are a powerful political constituency and protected by very high tariffs. Rice is not included in the free-trade deal with India.

Roland Buerk, BBC News, Tokyo

Listen

Click to hear the vocabulary:

Vocabulary

Show All | Hide All

trade

buying and selling or exchanging goods and services

mutual concern

shared worry or fear

clout

power and influence

tariffs

taxes on goods coming into or going out of a country

mired

caught up

deflation

falling prices for goods and services

eclipsed

overtaken or overshadowed by

economic power

country with a very strong economy

the Pacific rim

countries with coastlines by the Pacific Ocean

political constituency

here, group of people who are politically active and like to have their opinions heard by government