The Iter project has been held up for over 18 months as parties have tried to broker a deal between the two rivals.

The basis of a deal has now been worked out in which the "runner-up" receives a generous concessions package.

But Japan has always maintained its desire to host the project, despite reports that it is to stand down.

For the past three years, Japan had been set on building the International Thermonuclear Experimental Reactor (Iter; it also represents the Latin word meaning "the way") at Rokkasho in the north of the country.

But the Tokyo government has now reportedly decided that the benefits gained from EU concessions equal the benefits of hosting the project.

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Decision awaited

The six backers of Iter are to attend a ministerial meeting in Moscow on 28 June where - it is hoped - a final agreement will be signed on a choice of site.

Unlike some previous discussions, the meeting in Moscow has the power to make decisions.

According to the package suggested in May, Japan would get 20% of the project's 200 research posts while providing only 10% of the expenses, and host a related materials research facility - of which half the construction costs would be shouldered by the EU.

The organisation that would manage the project would also be selected by the partner that gave up its bid.

The EU would be expected to cover 50% of the construction and operational costs of the reactor, with the other five partners - Japan, China, South Korea, the US and Russia - contributing 10% each.

Lucrative package

Last week, Seiken Sugiura, Japan's deputy chief cabinet secretary, appeared to suggest a deal had been agreed: "It is not that 100% [of the project] goes to the other party and we relinquish 100%."

The European Commission cautioned an agreement was not certain: "We've been close to this point before," said a spokesperson; but she added that the commission was now "optimistic" a deal would be struck.

However, China and South Korea - which are providing as much funding as Japan - have now expressed their displeasure at the perks set to be heaped on the runner-up.

Iter will tap the energy from nuclear reactions like those that power the Sun. Nuclear fusion is seen as a cleaner approach to energy production than nuclear fission and fossil fuels.

It will be the largest fusion demonstration on Earth and will see the first sustained reactions required to generate useable power. The technical challenges involved are immense and commentators say a commercial fusion reactor is still decades away.

After the International Space Station, Iter would be the world's largest global research and development collaboration.