Japan has become the latest country to begin formally investigating the introduction of a carbon cap-and-trade scheme, confirming that officials are studying how such a scheme might work.

According to AFP reports, officials this week revealed that prime minister Yasuo Fukuda recently launched panel on the environment will investigate the feasibility of a cap-and-trade system. Officials at the trade ministry confirmed that it to is to launch a panel to look at the idea.

In a significant step, the Japan Business Federation dropped its opposition to any proposed trading scheme, claiming that with Japan due to host the G8 Summit of industrialised nations this July the country had to show leadership in the fight against climate change.

Speaking at a business event on Wednesday, federation chairman and chief executive of camera and equipment maker Canon Fujio Mitarai signalled that the group would withdraw its hostility top the idea of cap-and-trade, which it had previously dismissed as too costly. "For the success of the Toyako Summit, Japan, which is chair of the summit, needs to think about the issue based on global trends," he said. "Each country has already been making efforts in reducing emission of carbon dioxide, which is a global challenge."

Meanwhile, Prime Minister Fukuda said yesterday that the issue of sustainable forest management would be a major issue on the agenda at the G8 Summit. Speaking at an international environmental conference in Brazil, Fukuda said that there was an urgent need to "halt deforestation and forest degradation", adding that he was committed to promoting forest-related issues.

Attempts to tackle deforestation in countries such as Brazil and Indonesia have risen up the international agenda in recent years as economists and scientist have argued the protecting and even replanting forests represents one of the most cost effective means of tackling climate change. There was progress on the issue at last year's UN climate change conference in Bali where it was agreed that forestry projects could somehow be integrated into the carbon market, providing developing economies with a financial incentive to protect their forests.