Beijing and Tokyo are to work together to exploit gas reserves in disputed waters of the East China Sea, under a long-awaited deal demonstrating the determination of east Asia’s biggest powers to bridge their differences.

An agreement announced by the two governments on Wednesday opens the way for Japanese investment in a Chinese gas project that has stirred diplomatic friction. It also sets aside an area for joint exploration and eventual development. “This means we are going to make [the East China Sea] a sea of peace and friendship,” said Yasuo Fukuda, Japanese prime minister.