Prime Minister Shinzo Abe's cabinet gave the go-ahead to sign the agreement later in the day with Thailand's army-installed Prime Minister Surayud Chulanont, Japan's foreign ministry said.

"The agreement is expected to accelerate liberalisation of trade and investment as well as expansion of economic activities of both countries," the ministry said.

Surayud's government approved the deal last week, hoping that the pact with Thailand's largest investor will ease worries in the business community about protectionist policies since the military takeover.

The agreement was negotiated by Thailand's elected prime minister Thaksin Shinawatra, who was ousted in the September coup.

Free-trade negotiations between Thailand and the United States have stalled since the coup and Surayud has yet to visit any Western countries as premier.

But Japan has historic political and economic ties with Thailand, with many Japanese firms using Bangkok as a regional hub.

The government said it was not ignoring concerns about democracy in Thailand, where Surayud has promised to hold elections in December.

Abe "is very likely to call on Prime Minister Surayud to assure an early return to a normal democracy in their summit talks," a foreign ministry official told AFP.

He is also expected to appeal for Japanese investors to be treated equally with Thailand's domestic businesses, officials said.

Under the agreement, Japan and Thailand will lift tariffs on more than 90 percent of trade in 10 years and Bangkok has vowed to step up transparency and legal protections to help Japanese investors.

But activists -- some of whom were part of protests against Thaksin before his ouster -- have lashed out against the deal, saying it will turn Thailand into a dumping ground for Japan's toxic waste.

"Concerns by anti-globalisation activists are not legitimate as both Japan and Thailand are signiture countries of the Basel Convention which controls movement of hazardous wastes," the foreign ministry official said.

Agence France-Presse