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Threatened with sanctions, Japan agreed Saturday to double the number of its government-funded construction projects open to U.S. bidders, defusing at least for the moment a major source of trade friction.

Negotiators worked through the night to reach the agreement before a U.S. deadline expired, leaving Japan open to sanctions barring its companies from federally funded U.S. construction projects.The U.S. Embassy welcomed the agreement to open 17 new Japanese projects worth $7.3 billion to U.S. companies, saying it involved "major revisions."

The agreement "will make a positive contribution to U.S. construction firms seeking access to the Japanese construction market," a U.S. Embassy official said on condition of anonymity.

However, the embassy said in a statement that the agreement must still be accepted by "Cabinet-level" U.S. officials before the threat of sanctions is formally lifted.

Under the agreement, the Foreign Ministry said Japan will add 17 construction projects including airports, a hospital and a national threater to a list of 17 projects worth $25 billion listed under a 1988 agreement to open the construction market to U.S. firms.

Japan also said it will allow U.S. bidding on six other planned projects, if in fact they are implemented.

Construction is one of four most important trade issues between the world's two largest economies. The others are Japanese automobile exports, Japan's semiconductor market and Japan's refusal to import rice.

Japan's giant construction companies, along with some other Japanese industries, have long been accused of collusion and bid-rigging, which U.S. construction companies say have barred their entry into the market.