TOKYO (AP) ― Japan said Saturday it will take steps to forgive about 300 billion yen ($3.7 billion) of Myanmar’s debt and resume full-fledged development aid as a way to support the country’s democratic and economic reforms.

The government made the announcement after a meeting between Prime Minister Yoshihiko Noda and Myanmar President Thein Sein following a summit with leaders from the five nations of the Mekong River region.

Myanmar’s military junta last year handed power to a nominally civilian government that has surprised the world with a series of sweeping political and economic reforms, including releasing prominent political prisoners and allowing democracy icon Aung San Suu Kyi to contest recent parliamentary by-elections.

“Reforms in Myanmar are steadily moving forward. As Myanmar approaches a crucial stage in its democratization, Japan will all the more encourage Myanmar’s efforts to reform,” Noda said at a news conference with Thein Sein. “We hereby pledge to strengthen our assistance to the country so that the Burmese people will be able to enjoy the fruit of its reforms.”

Myanmar, also known as Burma, owes Japan about 500 billion yen from past development loans.

Of that amount, the Japanese government said in a statement that it will cancel 127.4 billion yen in loans due after April 2003. It will also forgive 176.1 billion yen in overdue charges accumulated over the past two decades after one year’s time as the two countries jointly monitor reforms.

Japan does not have sanctions on Myanmar, although it cut most government aid in 2003 after Suu Kyi was put under house arrest, which ended last November. Japan was Myanmar’s largest aid donor until 2003 and has continued small amounts of humanitarian grass-roots aid in health and education.

“On behalf of the Myanmar government and its people, I would like to express my gratitude to Japanese government officials and the people of Japan,” Thein Sein said. “The resolution of Myanmar’s debt issues as well as our cooperation and aid will be effective and helpful for the people’s efforts for the development and reform of Myanmar.”

Japanese companies had held back from investing in resource-rich Myanmar because they didn’t want to upset relations with the United States and the European Union, which have imposed sanctions on the country and due to the lack of transparency in business laws.

Recently, there have been moves toward the lifting of Western sanctions. On Monday, EU foreign ministers meeting in Luxembourg are expected to lift temporarily most sanctions against Myanmar.

Thein Sein told Japanese business leaders Friday that his country is eager for their investment and know-how to help his country grow.

Last week, the Tokyo Stock Exchange and Daiwa Securities Group said they had agreed with the Central Bank of Myanmar to help establish a stock market by 2015. On Thursday, NTT Data Corp. said it will establish a subsidiary in Yangon, citing the country’s “large potential.” All Nippon Airways Co. is also preparing to add service to Myanmar this fiscal year.

The news about the debt forgiveness comes after Japan earlier in the day pledged about 600 billion yen ($7.4 billion) in development aid and expertise to five countries in the Mekong River region ― Thailand, Vietnam, Cambodia, Laos and Myanmar. It was their fourth summit since leaders first met in 2009.

By strengthening its ties with Myanmar and other Mekong region countries, Japan is also looking to counter China’s growing influence in the region.

Noda emphasized continued cooperation with the region, saying, “The stability and development of East Asia is not possible without the stability and development of the Mekong region.”