Japan's finance minister will seek to strengthen economic ties with his country's biggest trading partner in a visit to Beijing this weekend at a time when political relations are at their lowest ebb in decades.

Japan-China relations have been strained over a range of issues, particularly Japanese Prime Minister Junichiro Koizumi's visits to a Tokyo war shrine that China sees as a symbol of Japan's past militarism.

In what will be a test of his financial expertise and diplomatic savvy, Finance Minister Sadakazu Tanigaki -- a dark-horse candidate to become Japan's next prime minister -- is set to meet his Chinese counterpart, Jin Renqing, on Saturday afternoon, heading a delegation of 30 ministry officials.

Tanigaki and Jin agreed last June to set up a new framework for regular meetings between finance ministry officials of the two Asian economic giants. This weekend's meeting is the first under this new framework.

Tanigaki said on Friday that topics would range from bilateral fiscal and financial issues to the global economy, and the sensitive topic of the Chinese yuan currency could be on the table.

"We may discuss the issue of the yuan as well as our country's efforts towards structural reform as part of the overall talks," Tanigaki told a news conference.

PRESSURE ON CHINA

China is under international pressure, particularly from the United States, to make its currency more flexible despite Beijing's removal of the yuan's decade-long peg to the dollar last July. The currency has appreciated 1 percent since then.

U.S. politicians claim that the yuan is so undervalued that it gives Chinese products an unfair advantage in U.S. markets. Two U.S. senators were in Beijing this week to decide whether to proceed with a vote on a bill that threatens to impose a 27.5 percent tariff on Chinese exports to the United States if China does not revalue the yuan further.

Japan, in contrast, is expected to take a softer approach out of concern that too much pressure could be counterproductive.

"We've been saying that currency policy is an important economic tool and that it would be better to have more flexibility," Hiroshi Watanabe, vice finance minister for international affairs, told reporters on Thursday.

Watanabe, Japan's currency policy tsar, added that China may be taking "a bit too long" to adapt to its new currency regime.

Tanigaki will also want to fend off worries at home that the lengthy political chill between the two countries may harm prospering economic ties.

China replaced the United States as Japan's top trade partner in 2004, and trade between the two rose 13 percent last year to a record $189 billion.

Japan said on Thursday it would postpone a decision on fresh yen loans to Beijing until after its fiscal year ends on March 31. While Tokyo said this did not mean Japan was cutting off or freezing aid to China, it could be a fresh bone of contention.

POLITICAL PROFILE

A successful outcome to the Beijing trip could boost Tanigaki's political profile ahead of a leadership race at home, where he is considered a contender for the prime minister's job when Koizumi steps down in September.

But Tanigaki, a 61-year-old former lawyer with a low-key image who has lagged other hopefuls in popularity polls so far, is not scheduled to meet any Chinese political leaders on the trip and may not have a chance to showcase his diplomatic skills.

Mending fences with China on the political front in any case is not seen easy, as shown by Trade Minister Toshihiro Nikai's visit to Beijing in late February.

Nikai was the highest-level Japanese official to meet Chinese leaders in months, but talks were marred by Chinese Premier Wen Jiabao's criticism of Koizumi's annual visits to the Yasukuni shrine, where convicted war criminals are honoured alongside Japan's war dead.

Japan invaded and occupied large parts of China from 1931 to 1945, and memories of Japanese atrocities run deep.

Tanigaki has taken a cautious stance on the Yasukuni issue.

"There is no change in my view that we need strategic ambiguity," Tanigaki said last week when asked whether a Japanese prime minister should visit the shrine.

Relations have also worsened due to competition over energy resources in disputed areas of the East China Sea, rivalry over regional dominance and mutual suspicion over military ambitions.