Japan and Mexico have failed to cement a free trade deal despite extensive talks in Tokyo this week ahead of the Asia Pacific Economic Cooperation, or APEC, summit in Bangkok. They had hoped to finalize an agreement on Thursday, when Mexican President Vicente Fox, en route to APEC, met with Prime Minister Junichiro Koizumi in Tokyo.

The key stumbling block: Japan's politically sensitive farm industry. Mexico demanded an end to Japanese tariffs on pork, one of its main exports. But Tokyo rejected the call to stop protecting its pig farming industry, which has strong political clout.

Japanese Trade Minister Shoichi Nakagawa remains hopeful.

He says the two sides were unable to break the impasse but negotiations will continue.

Japan - which is widely known for protectionist policies - has only one free trade agreement, signed last year with Singapore.

Meanwhile, Sony Ericsson, the world's fifth largest mobile phone maker, has posted its first quarterly profit since the joint venture between Japan's Sony and Sweden's Ericsson was launched two years ago.

Net profit for the third quarter came to $73 million, reversing a loss of $110 million from the same period a year earlier. Strong sales of camera-equipped handsets were behind the turnaround.

Increased corporate profits and exports appear to be helping Japan's fragile economic recovery. But Tokyo says its remains concerned about deflation and high unemployment as well as the recent steep rise in the yen against the dollar.

Economic Minister Heizo Takenaka says he is watching for volatility in the stock and currency markets as well as turbulence in the global economy, saying they could impact the future of Japanese companies.

A higher yen makes Japanese exports more expensive for foreign consumers and reduces the earnings of Japanese companies.