Japan promised to open markets in a number of areas including telecommunications and financial services to help boost opportunities for American companies.

BBC Japanese TV Editor David Powers on improvement in US-Japanese relations

Since Mr Obuchi's arrival in America last week, Japanese and American trade negotiators have been finalizing the contents of the new package.

President Clinton said that after less than a year in office Mr Obuchi had already taken important steps to pull Japan's economy out of its worst recession since World War II.

He also praised co-operation with Japan on security in East Asia and welcomed Japan's recent agreement to strengthen defence cooperation.

Steel warning

But Mr Clinton warned Japan to reduce its steel imports or the United States would act to block those imports.

"We will take action if steel imports do not return to their pre-crisis levels on a consistent basis," he warned.

"Playing by the rules of trade is the best way to sustain a consensus for open trade," the president added.

Last week the US Commerce Department accused Japanese steel companies of illegal steel dumping - selling abroad at less than home-market prices - and said that tariffs of up to 67% could be imposed on hot-rolled carbon steel, a widely-used product.

Such tariffs, which could be imposed retroactively, would effectively price that type of steel out of the US market.

Improved relations

Mr Obuchi, on the first official visit by a Japanese leader for 12 years, said the Japanese economy was already showing signs of improvement and he said he was determined to ensure its successful recovery.

"Since assuming the office of prime minister, I have boldly implemented every kind of measure aimed at achieving Japan's economic recovery," Mr Obuchi said at the opening of talks.

Mr Obuchi has described his country's ties with the United States as better than they have ever been in recent decades.

BBC analyst James Miles says Mr Obuchi's role in securing the passage of controversial legislation last month aimed at strengthening and expanding defence ties between the two countries has boosted his image in Washington.

But he says there are still concerns that Japan might not be able to achieve its economic growth target of 0.5% this year.