The ruling Liberal Democratic Party and the Liberal Party on Thursday agreed to begin a cooperative relationship that is expected to grow into a non-Cabinet coalition by the next ordinary Diet session, slated for January.

A basic agreement was reached during a meeting between Prime Minister Keizo Obuchi and Liberal Party leader Ichiro Ozawa and signed immediately afterward.

With the signing, hostile relations between LDP executives and Ozawa, who defected from the ruling party with a group of lawmakers in 1993, will be drastically altered. The agreement is the fruit of the LDP's desperate attempt to overcome its minority standing in the 252-seat Upper House.

However, the LDP, which holds 104 seats in the Upper House, will still fall short of a majority if it includes the Liberal Party's 12 seats. As the third-largest opposition party, the Liberal Party was also seeking to boost its presence in the political arena.

Under the accord, the Liberal Party will form a de facto non-Cabinet alliance with the LDP and fully cooperate with the party during the extraordinary Diet session that convenes Nov. 27., which convenes next Friday.

The two parties will jointly compile the fiscal 1999 budget and promote cooperation in future elections, according to officials from the two parties. The government usually completes the budget draft for the next fiscal year in late December for submission to a 150-day regular Diet session that opens in January.

Ozawa and Obuchi also reached a basic agreement on a set of policies covering three main themes -- political and administrative reforms, national security and tax reform -- that Ozawa presented at the beginning of their talks.

In accordance with those policies, the two parties will begin in-depth discussions to narrow their differences over issues such as the consumption tax.