India and Japan Friday took a major step forward in their bilateral relations, agreeing to step up security and economic engagements as part of an "eight-fold initiative" of cooperation in key areas.

Prime Minister Manmohan Singh and his Japanese counterpart Junichiro Koizumi, on a three-day visit here, also agreed to "further deepen" the "India-Japan Global Partnership" to give it a strategic orientation.

Both agreed at their talks at Hyderabad House that the world is witnessing "The New Asian Era", marked by a "new surge of change, creativity, and vitality" that is transforming the continent.

They reiterated their support to each other's candidature for permanent membership of the UN Security Council and expressed satisfaction at the ongoing cooperation among the G-4 countries - Brazil and Germany, besides them.

The Eight-Fold Initiative covers key areas - enhanced and upgraded dialogue architecture; comprehensive economic engagement; enhanced security dialogue and cooperation; and science and technology initiative. 

It also covers cultural and academic institutions and strengthening of people-to-people contacts; cooperation in ushering a new Asian era; cooperation in the UN and other international organisations; and cooperation in responding to global challenges and opportunities.

Koizumi started the day by paying homage at the memorial to Mahatma Gandhi. Besides the prime minister, Koizumi also met President A.P. J. Abdul Kalam, addressed a business meeting and inspected the Metro Rail, for which the major funding has come from Japan.

Koizumi's visit, his first to India, comes at a time when Japan's ties with China are under strain over a range of issues despite booming bilateral trade.

The testy ties with Beijing including over Beijing's charge that Japanese school textbooks sought to gloss over Japanese "aggression" against China during the Second World War has prompted Japan to look at India, one of the fastest growing economies in the world.

There is realisation in Japan that while it followed an over-cautious approach to investments in India, countries like South Korea have clearly stolen a march over it.

The two prime ministers signed a joint statement entitled "India-Japan Partnership in the New Asian Era: Strategic Orientation of India-Japan Global Partnership."   

The two governments will "make a special effort in collaboration with the private sector to encourage higher levels of investments by Japanese companies in India," the statement said.

"The two sides will take several measures for broadening and deepening economic and trade cooperation between them and decided to work towards a quantum increase of the trade volumes as well as for diversifying trade," it said.

The statement noted that India is the largest recipient of Japanese Overseas Development Assistance (ODA) and Japan confirmed that it would continue to support India's efforts at accelerated economic development, particularly in priority structures like infrastructure, including transportation and power, and environment.

It said the two sides recognized the need for "concerted efforts among Asian countries to translate the positive developments into an Arc of Advantage and Prosperity" as enunciated by Manmohan Singh at the ASEAN summit last year.  

Underscoring their rapidly growing ties, the two sides decided to institutionalise annual summits and encourage regular ministerial exchanges.

They also decided to launch a "high-level strategic dialogue" on major regional and international issues. 

Before the two prime ministers met, India's National Security Adviser M.K. Narayanan held talks with his Japanese counterpart Yoriko Kawaguchi. 

Energy security was another core area in which the two sides agreed to cooperate by launching a new oil and natural gas cooperation dialogue between their respective ministries. They also agreed to cooperate on improving Asian oil markets and enhancing investments in Asian energy infrastructure.    

Taking their economic engagement to a new level, the two sides decided to tap Japan's Special Terms for Economic Partnership Scheme for carrying out infrastructure projects in India.

On defence cooperation, the statement said the Indian Navy and the Maritime Self Defence Forces of Japan would cooperate to ensure the security and safety of international maritime traffic.

-- Indo-Asian News Service