Trade Minister Tim Groser says Japan runs the risk of economic isolation if it continues to hold out on trade agreements with its Pacific neighbours.

Speaking at a meeting of the Japan New Zealand Business Council, Mr Groser pointed out that Japan is the only major East Asian country with which New Zealand has no FTA completed or in negotiation.

Mr Groser says there’s desire for trade liberalisation on both sides.

“We’ve got [a] very good friendship with Japan. I think there’s a very strong sense in New Zealand…on both sides of unfulfilled potential."

He says the potential in a Japanese FTA is huge.

“Japan is still a huge economy. It’s still 8.3 per cent of world gross domestic product. That’s massive, and there’s a sense of unfulfilled potential here.

"I’m hoping that these forward-looking views in Tokyo that I’m reading about, that our embassy is monitoring extremely closely, indicate space and people like me, with an interest in pushing our own country’s interest, are trying to say ‘There is a pathway forward here.’”

Mr Groser says Japan is also debating whether to join the Trans-Pacific Partnership, which New Zealand is already part of.