updated 6/5/2006 8:53:29 PM ET 2006-06-06T00:53:29

The Japanese government decided to unfreeze aid loans to China on Tuesday amid signs of mutual effort to improve their icy relations, Kyodo News agency reported.

Japan halted the aid loans in March following Tokyo’s deteriorating ties with Beijing and mounting criticism in Japan that China’s booming economy no longer needed such loans.

A government economy panel early Tuesday approved lifting the freeze the loans that had been planned for fiscal 2005 ended March 31, Kyodo said.

A nationwide newspaper Yomiuri said the amount of loans is expected to be around $670 million, down $90 million from a year earlier.

The loan resumption is aimed at bolstering relations with China, which are at their most strained in decades. The decision, however, comes after recent meetings between foreign and trade ministers between the two countries.

Japanese Foreign Minister Taro Aso and his Chinese counterpart, Li Zhaoxing, met on the sidelines of an Asian economic conference in Doha, Qatar, last month, marking their first since a year ago. Japan’s Trade Minister Toshihiro Nikai invited China’s Commerce Minister Bo Xilai to the state guest house in Kyoto in late May.

Japan’s loans to China date back to 1979, seven years after the two Asian neighbors established diplomatic relations, but the annual amount had been dwindling since 2000 as Japan battled to revive its own economy after more than a decade of slump.

China, by contrast, has seen booming economy with 9 percent-plus growth in recent years and has started its own aid programs for developing countries.

Low-interest loans to China totaled $25.6 billion between 1979 and 2005, according to the Foreign Ministry.

China is among top recipients of Japanese official aid. But Tokyo announced last year it would phase out development aid to China by 2008, when Beijing hosts the summer Olympics.

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