Abbott

Diplomatic spin: Tony Abbott rides in Tokyo. Photo: Alex Ellinghausen

Tokyo: 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 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 later this week.

Trade Minister Andrew Robb has been burning the midnight oil in 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 has, so far, 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 the Australian Prime Minister that some extra ground has been given – particularly on Australian cheese.

Negotiations for the proposed FTA began under John Howard in 2007.

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

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

Estimates of the increased sales revenue flowing to Australian beef producers range between $300 million and $400 million if the current 38.5 per cent mark-up on imported beef into Japan is dropped to just over half that amount.

Insiders said Canberra had been seeking a halving of the tariff, phased in over several years, but a higher figure may eventually be agreed upon.

In a speech to be delivered to Japan's Chamber of Commerce and Industry on Monday, Mr Abbott plans to reinforce the case for freer trade, arguing it will benefit both sides even when it appears to come at an initial cost to local producers.

"It will allow both of us to develop further the industries that are our nations' strengths," he will say, according to provided speech notes.

"More affordable Japanese consumer products will be good for Australian families, more affordable Australian food will be good for Japanese families – more trade will make both countries richer and our relationship stronger."

Import tariffs on Japanese cars may be cut by 75 per cent initially and removed altogether three years later.

Mr Robb would not comment on specifics but sources close to him said the dairy industry is set for a much better deal, with cheddar set to gain new market entry in Japan.

In a potentially confronting decision, Mr Abbott's speech to business leaders liberally refers to World War II, in which Japan and Australia were enemies, with Mr Abbott remembering a time when RSL clubs refused car park entry to Toyotas such was the bitterness over Japanese war atrocities.

He was set to use the references to praise Japan's rapid ascent to among the world's best liberal democracies and "an absolute model international citizen."

Sources say Mr Abe has a lot riding on the Australia FTA because he hopes to use it to pierce a longstanding institutional reluctance to reform in the Japanese agricultural sector.