Both parties agreed to defer for five years talks on tariffs on small cars, while tariffs on steel products would be discussed in eight to 10 years, Thai deputy foreign permanent secretary and chief negotiator Pisan Manavapat said.

Prime Minister Thaksin Shinawatra will formally announce the deal while visiting Japan next month, which will be officially signed in April 2006 and become effective five months later, Pisan told reporters.

The negotiations lasted four hours on Sunday, instead of the scheduled one hour, and resumed again at 7:00 am Monday morning.

The major sticking point was Japan's demand that Thailand lower tariffs on luxury cars with 3,000 cc or greater engines. Thailand had said it could not drop the tariffs within the seven years Japan required, reports said.