The European Union and Japan have reportedly agreed “in principle” on a free trade deal.

According to the Associated Press, the deal will affect an overwhelming majority of commerce between the two economic powerhouses.

It’s expected to be officially endorsed at a summit on Thursday when EU Council President Donald Tusk and Japanese Prime Minister Shinzo Abe are due to meet.

In a tweet on Wednesday afternoon, EU Trade Commissioner Cecilia Malmstrom said: “We’ve reached political agreement” and “now recommend to leaders to confirm this”.

An EU official told AP said that the deal with the Japanese “means we have agreed on almost everything of importance to either side.”

If it is endorsed as expected, it will likely still take several months for both sides to finalise all the terms of the deal. A deal would reportedly require amendments to Japan’s protections for its dairy farmers. Their home market is protected by tariffs of up to 40 per cent on processed cheese. The dairy sector is a traditionally sensitive area for the EU.