A plan to link stock exchange trading between Taiwan and Japan will focus on giving Japanese investors access to exchange traded funds, or ETFs, listed in Taiwan that track capital markets in China, two people in Taipei familiar with the matter said.

The Taiwan Stock Exchange (TWSE) has been eager to broaden its trading links to bolster its position after the launch of a similar link between Shanghai and Hong Kong.

Last month, TWSE President Michael Lin said the exchange expects to reach an agreement with the Tokyo Stock Exchange sometime this year to have investors buy and sell ETFs on both markets.

"The relationship between Japan and China isn't good, but [Japanese investors] want to participate in China's capital markets. Taiwan is a ready springboard," said a person involved in the talks, who was not authorised to speak with media on the matter and so declined to be identified.

Japanese investors account for 1 percent to 2 percent of foreign investors in the TWSE. Foreign investors account for about a third of all stock trading.

Interest in China's capital markets rose last year when the Shanghai Composite Index surged nearly 53 percent, the best annual performance by any major stock market in 2014.

Sino-Japanese relations have long been tainted by what China sees as Japan's failure to atone for its occupation of parts of China before and during World War Two.