Japan and the Philippines are inching closer to a free trade agreement now that they have shelved the contentious issue of Japan's 270-percent sugar tariff, sources said.

Having solved their differences on agricultural and fisheries products during the latest round of talks last week in Manila, leaders of the two countries are now expected to sign a basic agreement for a free trade pact by the end of November, Japanese officials said.

The four-year postponement of discussions on sugar tariffs is seen as an attempt by both governments to avoid political backlashes stemming from concessions.

Although negotiations resumed Monday on outstanding issues such as steel products, Japanese officials said negotiators at the vice-ministerial-level talks reached a general agreement on more critical hang-ups concerning Philippine agricultural and fisheries exports, including chicken and tuna.

Japan says its 270-percent tariff on sugar is necessary to protect domestic producers, which include sugar-beet and sugar-cane farmers located mainly in areas with cold climates and remote islands.

The government says the farmers play a major role in job creation at farms and sugar factories in locations where farming is difficult.

Subsidies to sugar farmers represent 56 percent of the price of sugar beets and as much as 84 percent of sugar cane.

The Philippines produces 1.9 million tons of sugar annually, but only negligible amounts wind up in Japan. The Philippines wants Japan to become a major importer in the future.

But as circumstances surrounding international trade are expected to change by the time the two sides sit down to discuss the sugar tariffs again in four years, it is too early to say whether freer sugar trade will result, analysts say.

The Philippines initially pushed hard for Japan to scrap its tariffs on sugar and tuna, but has gradually eased its stance.

In last week's negotiations, Tokyo agreed to abolish tariffs on certain types of tuna and bananas, while offering to set import quotas with lower tariffs on pineapples and chicken.

In late October, the two sides agreed to the basic terms of conditions under which Japan will allow Philippine nurses and caregivers to work in Japan, another key issue.(IHT/Asahi: November 16,2004)