Spanish Prime Minister Jose Luis Rodriguez Zapatero on Friday affirmed the possibility of the European bloc signing a Free Trade Agreement (FTA) with Japan. We hope to sign the trade agreement with South Korea and Japan, Zapatero said at the meeting of business forum in southern Chinese island of Hainan.

Earlier in the week the EU trade commissioner had raised concerns over whether Japan will walk the talk on easing import restrictions on EU products.

In recent months, Japan has evinced strong interest in signing a trade deal with the 27-nation EU. Japan's main Asian competitor South Korea has already made a head start in finalizing a trade deal with EU, the world's biggest market. This has alarmed Japanese government which is pushed by the country's exporters to find wider markets abroad.

At the G-20 summit in Seoul last year, Japanese Prime minister Naoto Kan told European Council President Herman Van Rompuy and European Commission President Jose Manuel Barroso about his country’s interest in entering into free trade negotiations with the bloc.
The two sides also agreed to start high-level preparatory discussions before launching formal free trade negotiations at a summit scheduled sometime this year.

Some major issues will have to be sorted out by the EU and Japan before making headway in trade talks. Two key issues are the EU's demand that Japan eases non-tariff trade barriers including government procurement, and Japan's demand that EU tackles auto-related and other tariffs.

Japanese automakers and electronics giants have been ramping up efforts to make the government kick-start free trade talks with the EU, concerned about losing further market share to its South Korean competitors.

Japanese Daily Asahi Shimbun reported last November that Japanese manufacturers of home appliances, automobiles and other products will lose $3 billion worth of exports to the EU because of the EU-South Korea FTA.

What alarms Japanese automakers and electronic giants is the fact that under terms of the FTA, Korean manufacturers will be free of the EU's 10 percent tariff on automobiles and 14 percent tariff on TV sets.

As the trade talks start, Japan will come under pressure from the EU over the issue of non-tariff barriers as EU believes Tokyo's efforts those barriers are not yet sufficient.

The EU has been pressuring Japan to ease safety standards for automobiles and to hasten the screening process of medical devices while Tokyo wants the EU to halt tariffs on automobiles and flat-panel televisions.

EU Trade Commissioner Karel De Gucht said on Wednesday that Japan must convince the EU of its willingness to open its markets to EU importers before the two sides can launch talks in May.