(Nov 7): China and Japan agreed to build “mutual political trust” as they seek to defuse tensions over territory, heightening the prospect of an inaugural summit next week between their current leaders.

The two countries said in a joint statement they held differing positions over islands in the East China Sea, marking the first time Japan has acknowledged China also has claims to the territory. To avoid any “unforeseen incidents” in the area, where ships and planes from the two countries regularly tail one another, they pledged to build a crisis-management mechanism.

Both sides agreed to gradually restart various political, diplomatic and security talks that were frozen as ties deteriorated. China has demanded Japan do more to acknowledge its militant past and the countries said in their joint statement they now agreed to face history directly.

As a result of the agreement, President Xi Jinping and Prime Minister Shinzo Abe will hold a summit at the Asia-Pacific Economic Cooperation meeting in Beijing, Japanese state broadcaster NHK reported, without saying where it got the information. The two leaders have not held formal talks since Abe came to power in December 2012.

Relations between the world’s second- and third-largest economies have soured over the territorial spat and lingering resentment over Japan’s role in occupying parts of Asia in the run up to World War II. While Japan seems to have acknowledged key Chinese demands for improving ties the agreement marks a victory for Abe, who had been pressing for a rapprochement with his country’s biggest trading partner.

For Xi, granting an audience on his home turf may help the Chinese president boost his standing as a statesman as he seeks great power status to match that of the U.S. in Asia.

Island Issue

Japan’s purchase in September 2012 of uninhabited islands in the East China Sea -- known as Senkaku in Japanese and Diaoyu in Chinese -- sparked demonstrations in China. Encounters between ships and planes from the two countries have raised the potential for an accident. While bilateral trade is recovering and Chinese tourists are flocking to Japan, Japanese investment in China slumped by half in the first half of 2014 and surveys show animosity among the public in both nations.

In December last year, Abe sparked anger from China and South Korea when he visited Tokyo’s Yasukuni Shrine, which honors the country’s war dead.

In October, former prime minister Yasuo Fukuda meet Xi for the second time in recent months in China, and Abe shook hands with Chinese Premier Li Keqiang in Milan last month. Abe’s top security official, Shotaro Yachi, met counterparts in Beijing yesterday.