China and Japan signed an agreement on Friday relating to Japanese loans to China for last year, a gesture that could help warm the icy relations between the two countries.

Japan will offer 74.8 billion yen (US$660 million) to China, according to the document signed by Vice-Foreign Minister Wu Dawei and Japan's Ambassador to China Yuji Miyamoto in Beijing.

The loans will be used in 10 projects, involving environmental protection, human resource and education.

Japan's cabinet traditionally approves yen loans during the fiscal year they are earmarked for.

However, the procedure was put on ice last year due to the frosty state of relations between the two countries.

Bilateral ties were strained because of friction over such issues as Japanese leaders' repeated visits to the Yakusuni Shrine which honours war criminals from World War II along with other war dead.

Another thorny issue is the row over oil exploration in the East China Sea.

Earlier this month, the Japanese Government decided to lift the freeze on aid loans amid signs of mutual efforts to ease tension.

Analysts say the move on the part of Japan is apparently aimed at improving Sino-Japanese relations.

This follows Foreign Minister Li Zhaoxing's agreement last month on the sidelines of the fifth ministerial meeting of the Asia Co-operation Dialogue in Doha to promote exchanges in economic, defence and other areas between the two nations.

During the meeting, Japanese Foreign Minister Taro Aso told his Chinese counterpart that Sino-Japanese ties were improving. He said extending yen loans would further accelerate this trend.

The low-interest loans date back to 1979, seven years after China and Japan established diplomatic relations.

While China is among the top recipients of Japanese aid, the amount of yen loans to China has been declining since peaking in 2000, with 85.9 billion yen loaned in 2004.

Japan plans to terminate aid to China by 2008, when Beijing hosts the Olympic Games.

(China Daily June 24, 2006)