By Masayuki Kitano

TOKYO, Apr 4 (Reuters) Japan's trade ministry wants to create an ''East Asia'' free trade zone including southeast Asia, China, India and Australia, an official said on Tuesday, in a renewed push for regional economic integration.

Japan, keen not to fall behind China, has stepped up its pursuit of free trade agreements in recent years but progress has been slow, with negotiations often complicated by Tokyo's desire to protect the nation's agriculture industry.

The Ministry of Economy, Trade and Industry (METI) is likely to soon unveil a proposal calling for the pursuit of a massive 16-nation trade zone including Japan, the 10 members of the Association of Southeast Asian Nations (ASEAN), China, South Korea, India, Australia and New Zealand, the official said.

''We want to conclude negotiations by 2010,'' said Takeshi Fujimoto, deputy director for METI's economic partnership division.

''Both trying to launch such negotiations as well as trying to conclude them might be considered ambitious,'' he said.

''But with discussions for east Asian (economic integration) on the rise, we don't think it's something you should spend a lot of time studying,'' Fujimoto said, adding that the trade ministry would aim for consensus within the Japanese government.

According to a METI estimate, such a regional free trade pact would boost Japan's gross domestic product (GDP) by around 5.0 trillion yen (.5 billion) and the total GDP of countries taking part by around 25.0 trillion yen, he said.

Trade Minister Toshihiro Nikai may unveil the proposal at a meeting of the government's Council on Economic and Fiscal Policy on Friday, Fujimoto said.

DIFFICULT GOAL? The feasibility of such a regional agreement, however, is open to question, especially given Japan's limited track record of clinching free trade pacts as well as chilly ties with China.

Asked about the feasibility of Japan pursuing an FTA that involves China at this juncture, Fujimoto said that while there were various political issues, interest in such a deal was high within Japan's business community.

''There are strong calls from the industrial sector for...an FTA with China,'' Fujimoto said.

Despite burgeoning two-way trade, Japan-China ties are at their worst in decades due to a dispute over Prime Minister Junichiro Koizumi's visits to Tokyo's Yasukuni shrine, which honours some war criminals along with Japan's war dead.

Ken-ichi Takayasu, a senior economist for private think tank Japan Research Institute, said the sheer number of countries involved would pose a challenge.

''I think it would be a bit difficult. The more countries are involved the harder it will be to clinch a deal,'' he said.

There is also a lack of consensus among countries about the idea of forging a regional FTA, said Takayasu, adding that the idea of including Australia, India and New Zealand may be meant as a check against China.

Japan has signed free trade agreements with Singapore, Mexico, and Malaysia and has also agreed in principle to FTAs with Thailand and the Philippines.

Japan is also in free trade negotiations with South Korea and has begun talks with ASEAN aimed at clinching a pact to create a giant regional free trade zone.

REUTERS SS BST1230