Japan and South Korea have signed a mutual investment accord which could pave the way for a free trade agreement.

Japanese prime minister Junichiro Koizumi is visiting South Korean president Kim Dae-jung as the two countries attempt to thaw out their frosty relationship ahead of their joint hosting of football's World Cup this summer.

The agreement is expected to help South Korea attract investment from Japan, and make it easier for Korean companies to enter the Japanese market.

Japan already has similar agreements with several countries, including Russia and China.

Difficulties ahead?

The two leaders are expected to agree later on Friday to start exploring a bilateral free trade agreement.

Japan already has free trade agreements with Singapore and Mexico.

Setting up such an agreement with South Korea could prove difficult though, analysts warn, as the country would be keen to protect its agriculture sector from the competition such a pact would invite.

Tokyo has recently expressed interest in forging a free trade pact with members of the Association of Southeast Asian Nations and expanding it into the economic community that includes Korea, China, New Zealand and Australia.

The combined gross domestic product of Japan and South Korea, which together have 170 million people, was $4.56 trillion in 2001, compared with $10 trillion for the United States and $7.9 trillion for the European Union.