Minori Shinmura and Kouji Yoshii, cyclists from the Japan Cycling Federation, shows his gold medal to Prime Minister Tony Abbott ahead of their bike ride, in Tokyo on Sunday 6 April 2014.

Cyclists Minori Shinmura and Kouji Yoshii speak with Mr Abbott after their ride in Tokyo on Sunday. Photo: Alex Ellinghausen

Hopes of a last-minute breakthrough in stalled free-trade agreement talks between Japan and Australia hung on private talks between the two prime ministers on Sunday night.

The growing bond between the two conservatives is set to facilitate new deals on trade as well as on defence technology transfer and development – an area of huge sensitivity in officially pacifist Japan and one that will be unfavourably viewed in South Korea and China, to which Prime Minister Tony Abbott will travel this week.

Trade Minister Andrew Robb has extended talks with his Japanese counterparts, but sources say his insistence on getting serious concessions to reduce import tariffs and increase market quotas for Australian agricultural products so far has failed to reach a satisfactory bargain.

Mr Robb has repeatedly said he will not give the go-ahead to a substandard deal for Australian producers, but there is speculation among business leaders travelling with Mr Abbott that some extra ground has been given – particularly on Australian cheese.

In a sign of the desperation of both countries to bridge the remaining areas of difference, Mr Abbott and Japanese PM Shinzo Abe dined privately on Sunday evening – less than 24 hours before the pair had pencilled in a hand-shaking ceremony to announce the new agreement.

The deal, which would mean much cheaper Japanese cars in Australia and greater access to Japanese markets for beef, dairy and other agriculture, could be worth billions in extra wealth more to the Australian economy over the next two decades.

But, if agreement is reached, fair trade advocates have warned Japanese companies would be able to sue Australian governments.

The so-called investor state dispute settlement clauses would give Japanese companies the right to take Australia to international tribunals over decisions they felt impinged on their interests, a right denied to Australian companies.

A settlement provision is being used by tobacco giant Philip Morris to challenge Australia's decision to require plain packaging of cigarettes. Shortly before losing its case in the High Court, Philip Morris incorporated a company in Hong Kong to take advantage of settlement provisions.