China and Japan signed the final Japanese  Yen loan agreement on Friday which funds six environment projects in China's inland provinces.

The agreement was signed between Li Yong, China's deputy Finance Minister and Koji Tanami, the governor of the Japan Bank for International Cooperation.

The 46.3-billion-yen ($420 million) loan for the fiscal year 2007 will bring the total amount the Japanese government lent to China since 1979 to 3.316 trillion yen.

Yen loans are part of Japan's official development aid, and are used on environmental projects and infrastructure. Japan has been reducing its official development aid to China from a peak in 2000/2001 in view of its fast-developing economy.

The loan carries an interest rate of 0.65 percent to 1.4 percent and has a term of 25 to 40 years.

It will help six cities and provinces in central and western China - including Lanzhou of Gansu Province and Nanyang of Henan Province - build six projects to reduce air pollution and deal with urban waste.