Japan, India vow to boost strategic ties during summit

By Kiyoshi Takenaka

TOKYO (Reuters) - Japan and India agreed on Monday to strengthen strategic ties as Asia's second and third biggest economies keep a wary eye on a rising China, and said they would accelerate talks on the possible sale of an amphibious aircraft to India's navy.

Japanese Prime Minister Shinzo Abe and his Indian counterpart Narendra Modi also agreed to speed up talks on a so-far elusive deal on nuclear energy cooperation, welcoming what they called "significant progress" in the negotiations.

"The two prime ministers reaffirmed the importance of defence relations between Japan and India in their strategic partnership and decided to upgrade and strengthen them," Abe and Modi said in a statement after a summit in Tokyo.

Modi, on his first major foreign visit since a landslide election win in May, arrived on Saturday for a five-day trip aimed at capitalising on a personal affinity with Abe to bolster security and business ties in the face of an assertive China.

In a sign of their warm ties, the two leaders greeted each other with a bear hug when they met on Saturday in Japan's ancient capital of Kyoto for an informal dinner. Modi is one of three people that Abe follows on Twitter, while the Indian leader admires Abe's brand of nationalist politics.

"The 21st century belongs to Asia ... but how the 21st century will be depends on how strong and progressive India-Japan ties are," Modi told Japanese and Indian business executives earlier in the day.

"The 18th century situation of expansionism is now visible," Modi said, referring to incidents such as encroachment of others countries' territories and intruding in other countries' seas, in a veiled reference to China, with which India shares a long disputed border.

"Such expansionism would never benefit humanity in the 21st century," he said.

Sino-Japanese ties have also been chilled by a row over disputed isles, feuds over the wartime past, and mutual mistrust over defence policies as China seeks a bigger regional role and Abe loosens the constraints of Japan's post-war pacificism.

Abe is keen to expand Japan's network of security partnerships with countries such as India and Australia to cope with the challenge presented by China.

MARITIME DRILLS, NUCLEAR DEAL

Modi, for his part, is embarking on an intense month of diplomacy in which he will receive Chinese President Xi Jinping before meeting U.S. President Barack Obama in Washington as he seeks to carve out a stronger role for India as a global player.

"The two prime ministers ... affirmed their shared commitment to maritime security, freedom of navigation and overflight, civil aviation safety, unimpeded lawful commerce, and the peaceful settlement of disputes in accordance with international law," the joint statement said.

Abe and Modi agreed to look into upgrading a 'two-plus-two' format for security talks by bringing together their foreign and defence ministers, and directed officials to launch working level talks on defence equipment and technology cooperation.

They also agreed to hold regular maritime drills, and that Japan would continue to participate in U.S.-India drills.

The two leaders agreed to set a target of doubling Japan's direct investment in India within five years. Abe expressed Japan's intention to realise 3.5 trillion yen (33.6 billion dollars) in public and private investment and financing including foreign aid to India in five years for projects in areas such as infrastructure and clean energy.

India needs faster economic growth to create work for the one million young people who enter the workforce every month.

In early steps, Modi has allowed foreign investors to own 100 percent of railway projects with an eye to drumming up interest in building India's answer to Japan's high-speed 'bullet' trains. He is also courting Japanese investment in an ambitious industrial "corridor" to run between Delhi and Mumbai.

Japan's Honda Motor Co Ltd, Suzuki Co Ltd, Sony Corp and Toyota Motor Corp are household names in India. Yet, India accounts for only 1.2 percent of Japan's total outward foreign direct investment.

Hopes of striking a nuclear energy deal at the summit similar to an accord reached with the United States in 2008 had faded in the run-up to Modi's visit. Still, the leaders said there had been "significant progress" in negotiations.

Japan wants explicit guarantees from India, which has not signed the nuclear non-proliferation treaty, to limit atomic tests and allow closer inspection of its facilities to ensure that spent fuel is not used to make bombs.

Japanese firms also want clarity on nuclear disaster compensation, especially after the 2011 Fukushima catastrophe.

(1 US dollar = 104.2600 Japanese yen)

(Additional reporting by Iro Minier in Tokyo and Aditya Kalra and Malini Menon in New Delhi; Writing by Linda Sieg; Editing by Jeremy Laurence)