A top Finance Ministry official indicated caution July 28 on the idea of making Okinawa Prefecture a free-trade zone, saying the effects on local industry should be considered.

Vice Finance Minister Takeshi Komura told a news conference that establishment of a free-trade zone would affect various areas, including local industry. "We need to first see how it would affect industry in the prefecture -- sugar cane production, for example," he said.

Last week, a report drawn up by a prefectural advisory panel said Okinawa, a key military position for the United States, should be turned into a free-trade zone with no import tariffs by 2001. It was one of several proposals laid out in a bid to encourage investment in the prefecture and raise economic activity there. Gov. Masahide Ota was to present the report to central government authorities July 29.

But the ministry has been reluctant to accept a no-tariff zone within Japan because it is against having two tariff systems in one country. Komura said he would first like to hear what the prefecture's actual requests are, adding that it was still unclear whether the panel's report reflects all of the needs and demands of the prefectural government.