TOKYO, Jan 3 (Reuters) - Japan is planning to buy up carbon credits yielded by its investments in emissions-cutting projects in China, a newspaper said on Thursday.

The two governments agreed the deal on Wednesday and will formally sign it when President Hu Jintao visits Japan, probably in late March, the Yomiuri Shimbun said.

Tokyo and Beijing will then select emissions-cutting projects to be funded by yen-denominated loans, the Yomiuri said.

A third of the projects funded by such loans since they began in 1980 have been environment-related, the paper said.

For example, six projects agreed in the current Japanese financial year, which ends in March, could generate emissions reductions equivalent to 10 million to 15 million tonnes of carbon dioxide over the next five years, the paper said, citing a government estimate.

The paper said the price of the credits was not given.

Japan is the only Asian country with an obligation under the U.N.'s Kyoto Protocol to cut its emissions of greenhouse gases, but it has been lagging behind its commitment to a 6 percent cut from 1990 levels during the 2008-2012 period.

Tokyo late last year finalised a list of additional measures to cut roughly 35 to 36 million tonnes of carbon dioxide (CO2), mainly by extra voluntary agreements with industries and more energy conservation.

But it has also been looking abroad for credits generated under the Kyoto pact's Clean Development Mechanism, which allows rich polluters to pay for emissions reductions in developing nations in return for credits to put towards domestic quotas.

Last December, Japan agreed to buy credits from Hungary, and officials said it is also in talks with countries, including Poland, the Czech Republic and Ukraine, on similar deals. -- For additional news, analysis and blogs, Reuters subscribers are invited to join the Reuters InterActive Carbon Markets Community at http://www.reutersinteractive.com (Reporting by Isabel Reynolds; Editing by Emma Graham-Harrison and David Fogarty)

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