Tokyo will waive about 300 billion yen ($3.7 billion) of Myanmar's debt and resume suspended assistance to the country, the Japanese government said Saturday.
"Myanmar's reforms are progressing with certainty," said Japanese Prime Minister Yoshihiko Noda at a joint press conference in Tokyo after meeting Myanmar President Thein Sein for talks.
"At a time when Myanmar's democratisation is reaching a key stage, Japan is declaring to further support its efforts to reform and to continue bolstering assistance," he said.
As a first step, Japan will waive 127.4 billion yen in debt that was first agreed in 2002 but was suspended while the country was in the grip of the military regime, an official statement said.
The remaining 176.1 billion yen, including interest and delay penalties, will be forgiven on the condition that the process of democratisation continues apace.
"The two leaders shared the view that addressing Myanmar's debt issues in a comprehensive way is important for Myanmar's reengagement with the international community," said the statement.
Thein Sein is the first Myanmar head of state in 28 years to visit Japan, as the former dictatorship is gradually welcomed back into the global community. The five-day visit ends Tuesday.
During the talks with Noda, Thein Sein said Myanmar will continue pursuing further reforms, "focusing on further democratisation, protection of people's rights and reconciliation", a Japanese official who attended the meeting quoted him as saying.
He repeated that the relationship between Myanmar and Japan was able to "open a new page" through his visit to Tokyo and the fresh cooperation agreement, including the debt waiver, he said.
Thein Sein was visiting Tokyo for a Japan-Mekong summit, in which leaders from Cambodia, Laos, Thailand and Vietnam also took part.
Japan, which has an export-dependent economy, is attempting to foster growth in the resource-rich Mekong region, which is also being courted by China.
Myanmar, long a global outcast, has been rapidly rehabilitated since polls last year saw the election of a nominally civilian government.
Earlier this month, democracy campaigner Aung San Suu Kyi was elected to parliament and international sanctions on the regime are increasingly being relaxed.
EU countries have agreed in principle to suspend all sanctions against Myanmar, with the exception of an arms embargo, for a 12-month period.
During its years of isolation, Japan -- unlike its Western allies -- maintained trade ties and dialogue with Myanmar, warning that a hard line on the then-ruling junta could push it closer to China, its key ally and commercial partner.
Aung San Suu Kyi plans to visit Britain and Norway as part of her first trip outside Myanmar in 24 years, her party said Wednesday, in the latest sign of her confidence in the country's reforms.