The deal creates the biggest open economic area negotiated by the EU and is expected to liberalise the majority of trade between the bloc and Japan. 

After the agreement was announced on Friday, European Commission president Jean-Claude Juncker said: “The EU and Japan send a powerful message in defence of open, fair and rules-based trade.”

The prime minister of the world’s third largest economy, Japan, Shinzo Abe said the deal marked the birth of a “gigantic economic zone”.

As part of the deal the EU will slash Japan’s tariffs on imports of European cheeses and other dairy products, along with meat and wine.

Brussels will also end EU import duties on Japan’s automobile sector, the world’s biggest importer of road vehicles.

The bloc’s commissioner for trade Cecilia Malmström said: “The EU and Japan share a common vision for an open and rules-based world economy that guarantees the highest standards.

“The potential of this deal is enormous and I'm glad that the EU and Japan remain fully on course to sign it next year.

“That way, EU firms, workers and consumers will be able to enjoy the benefits as soon as possible,” she said.

The deal now has to be signed and ratified by both sides.