The study will look at trade in goods and services, investment, intellectual property rights and agriculture, an area where Australia has frequently criticized Japan for excessive protectionism.

"Both sides know there are difficulties in negotiations on the agricultural sector," said an official at Japan's foreign ministry.

The study, which was agreed to during Prime Minister John Howard's trip to Japan in April, is due to be completed within two years. A first meeting on the study was held in Australia in September at a lower level, officials here said.

Australia has been pushing to open up the Japanese market. Trade Minister Mark Vaile said in September that a free trade agreement could generate an additional 66 billion dollars (50.8 billion US) in bilateral trade over 20 years and he was confident the study would recommend FTA negotiations.

Since 1967, Japan has been Australia's biggest export market, with Japan buying 2.1 trillion yen (19 billion US dollars) of goods ranging from beef to natural gas last year, according to the Japanese finance ministry.