(Transcript from World News Radio)
Tony Abbott has declared Japan as Australia's best friend in Asia.
And there are strong signs that Australia will be placing emphasis on ties with Japan in 2014, with speculation that a Free Trade Agreement is imminent.
But some critics fear the agreement could cost Australian jobs and hurt Japanese farmers as well.
Michael Kenny reports.
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Seven years of tough talks between Japanese and Australian trade officials are expected to end in a landmark Free Trade Agreement this year.
Japan is Australia's second largest trading partner, with annual trade between the two countries totalling more than $7 billion in 2012.
Trade Minister Andrew Robb says the signing of a free trade agreement with South Korea last year has helped Australia's struggling manufacturing and agricultural sectors.
Mr Robb says similar benefits could be expected from free trade agreements with Japan and China.
"The world really, from my observation and I saw it again at (the World Economic Forum) Davos and I've seen it all over the developed world, they're looking for alternative policy approaches to drive growth at a level that will bring down unemployment in a sustainable way. So in that regard, all eyes really are on trade and investment as a major component of driving sustainable growth and jobs."
Professor Takatoshi Ito is a former Japanese government advisor, and International Monetary Fund economist.
He says the proposed Free Trade Agreement between Japan and Australia will be significant.
"I think Japan and Australia are natural partners in that they are not really competing in any sector in the global market. Rather Japan needs Australia for its natural resources and human capital and Australia needs Japan for manufactured goods."
The Australia-Japan Business Cooperation Committee believes a Free Trade Agreement would greatly benefit both countries and lead to cheaper products for consumers through lower tariffs.
The Committee's Executive Director Paul Gallagher says there could be some particularly strong gains for the Australian economy.
"Japan is our number two market. It's the third largest economy in the world. The size of the Japanese economy is larger than number four (in the world) which is Germany and number five which is France combined. So I think we've all got perceptions of the size of the German and French economies and then you consider Japan being equivalent to both of those."
Australia's exports to Japan are dominated by raw materials, particularly coal, while Australia imports a lot of manufactured goods from Japan.
One of the long-running obstacles to reaching a Free Trade Agreement with Japan has been concerns over the impact it could have on Australia's automotive industry.
With Toyota joining General Motors and Ford in announcing plans to cease manufacturing operations in Australia, that obstacle now appears to have gone.
But the advocacy group, the Australian Fair Trade and Investment Network, believes a free trade agreement with Japan would still have a negative impact on Australian car parts suppliers.
And the group's Convenor, Dr Patricia Ranald believes Japan is also likely to insist upon the exclusion of its agricultural sector from any free trade agreement.
She says this could in turn prevent Australian wheat and rice exporters from benefiting from the deal.
Dr Ranald also says there could be some worrying legal implications for Australia under a Free Trade Agreement which should be addressed.
"The Japanese may insist on having what's called 'investor state disputes' which means special rights for foreign investors to be able to sue Australian governments for damages if a law or policy harms their investment. There's a lot of Japanese investment in Australia and there is a big danger that we could find for instance that Japanese mining companies might be suing the New South Wales government over its regulation of coal seam gas mining."
Dr Ranald says similar legal implications have already been noticeable under the Free Trade Agreement between Australia and the United States which came into force in 2005.
She says the agreement allowed the U-S owned tobacco company Philip Morris to take legal action against the Australian government in 2011 over its laws covering the plain packaging of cigarettes.
However Paul Gallagher from the Australia-Japan Business Cooperation Committee says such concerns over free trade deals have been greatly exaggerated.
He says the Free Trade Agreement between Australia and Japan would be submitted to scrutiny by a federal parliamentary committee and would then need to pass both houses of the Australian parliament before being adopted.
Mr Gallagher says there has been considerable public debate over the proposed agreement since 2007 and he is hopeful of a deal being reached this year.
"I would certainly hope that 2014 is the year prospectively now that you've got new governments in both countries, an exchange of Prime Ministerial visits and so certainly one would hope that a free trade agreement would be amongst those issues."
However some economists remain sceptical about the Free Trade Agreement.
Associate Professor Len Perry specialises in economics and trade policy at the University of Technology in Sydney.
He believes there are clear discrepancies between the agricultural sectors in the two countries, and unless agriculture is excluded from the deal, Japanese farmers could suffer.
"The Japanese farmers, perhaps understandably from their perspective, seek protection through tariff protection or other forms of protection from competition from the outside world and if freer trade is permitted in agricultural products, then that would lead to a shrinking of Japan's agricultural sector."
University of Tokyo economist and former Japanese government advisor Professor Takatoshi Ito takes a different view.
He believes Japan's Prime Minister is likely to compromise in this year's negotiations and allow for tariffs to be lowered in Japan's agricultural sector.
Professor Ito says this could give Australian wheat and rice exporters greater access to the Japanese market.
And Professor Ito says Japan could then push for greater access to Australia's natural resources.
"I'm sure that the Abe administration is ready to make some, in traditional terms, compromises and in my terms that would be a step forward to lower the tariffs and make domestic regulations liberalised."
Prime Minister Tony Abbott is due to make a visit to Japan in April.
His Japanese counterpart Shinzo Abe is then set to visit Australia, and will make history in July when he becomes the first Japanese Prime Minister to address the federal parliament.
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