The agreement will lower trade barriers, enhance economic cooperation between the two countries and boost Japanese investment in Brunei.

"The economic agreement we just signed will raise the stable and friendly Japan-Brunei relationship to a higher level," Japanese Prime Minister Shinzo Abe said at the joint press conference with visiting Sultan Hassanal Bolkiah.

"I'm glad we were able to sign the deal only one year after we started the negotiations," he added.

Japan is Brunei's biggest export destination, shipping some 270 billion yen (2.2 billion dollars) in 2006, mainly oil and natural gas, while Japan exported machinery and other goods worth 12 billion yen to Brunei.