Japan and Mongolia signed a free-trade deal yesterday, as Tokyo looks to tap the fast-growing economy and its vast supply of natural resources.
Japanese Prime Minister Shinzo Abe and Mongolian President Tsakhiagiin Elbegdorj announced the deal in a joint statement. Under the deal that covers a range of products, including beef and cars, all Mongolian exports to Japan and 96 per cent of Japanese products sent to Mongolia will be exempt from any tariffs within the next decade, officials said.
The agreement could help foster stability in the region, a foreign ministry official added, as Japan works to resolve the case of Japanese citizens who were abducted during the cold war by North Korean agents.
Mongolia is one of the few countries that has formal diplomatic relations with Pyongyang, which is regularly criticised for stoking regional tensions.
"(We're) hoping to deepen ties with Mongolia to work together on keeping stability in northeast Asia," the official said.
The trade deal includes a so-called investor-state dispute settlement clause, which allows firms to pursue compensation claims if they think government policy has damaged their investment. This has been criticised for giving firms too much power over public policy.
"The trade balance between Mongolia and Japan is currently a surplus for Japan, but that can change quickly if mineral imports rise," a senior trade ministry official said.
Japan-Mongolia trade stood at 31.2 billion yen (HK$2.38 billion) last year, far behind Tokyo's massive trade relationships with the United States and China.
In April, Japan reached a broad trade agreement with Australia and is now working on a wide-ranging deal with the European Union and the Trans-Pacific Partnership, a vast Pacific-wide deal led by the United States.
Mongolia, wedged between Russia and China, has seen big economic growth in recent years as global firms seek to tap into its vast natural resources.
In May, Pyongyang had agreed to reinvestigate the kidnapping of Japanese citizens during the 1970s and 1980s, in what appeared to be a significant breakthrough on an issue that has long hampered Tokyo's relations with Pyongyang.
The two counties have no formal diplomatic ties.