The New Zealand government Friday welcomed an agreement in principle on a new double tax arrangement with Japan.

Revenue Minister Peter Dunne said it was a very positive step towards modernizing New Zealand's tax treaty arrangements with Japan, which were "quite dated."

"The updating of the treaty recognizes the importance of Japan as a major investment and trading partner," Dunne said in a statement.

The announcement followed negotiations last week, during which officials from both countries agreed in principle to a range of business-friendly tax changes that would be included in a new double tax agreement once it had been approved by both governments.

Dunne said the changes, which would include lower withholding tax rates on dividends, interest and royalties, and an arbitration provision to deal with taxpayer disputes, would be welcome news for businesses and investors in both countries.

"As well as helping to further strengthen economic ties and facilitate increased bilateral investment between the two countries, the new agreement will build upon the existing arrangements for cooperation on tax matters with Japan," Dunne said.

The text of the agreement would be publicly released after the two governments had signed it, and would come into force once both countries had completed their respective legal requirements.

This year marks the 60th anniversary of New Zealand-Japan diplomatic relations.