TOKYO, Oct 22: Japan on Wednesday offered a record $4.5 billion in loans to India to build a major railway as the Asian powers agreed to step up both economic and military ties.

Indian Prime Minister Manmohan Singh and his Japanese counterpart Taro Aso hastened to deny that the cooperation was aimed at countering China, where both leaders head on Thursday for a summit of Asian and European leaders.

Under the agreement signed in Tokyo, Japan will provide an initial 450 billion yen ($4.5 billion) in low-interest loans to build the freight railway between New Delhi and Mumbai.

The 1,468km railway between India’s two largest cities will also include economic sectors around the tracks.

It is aimed at improving a creaky infrastructure seen as a key bottleneck holding back India’s economy.

The two leaders pledged to step up military cooperation, including to help the “war on terror” and disaster relief.

“This reflects our shared desire to contribute to peace, prosperity and stability in Asia and the world,” Singh told a joint news conference with Aso.

Japan last year held joint naval exercises with India and the United States, despite Tokyo’s post-World War II constitution which bars the country from ever using force.

Aso, a conservative who took office last month, has in the past advocated building ties with fellow democracy India to offset frequent tension in Japan’s relationship with China. But both Aso and Singh denied reporters’ suggestions that they were focused on China.

“Economic partnership and security cooperation between India and Japan are not at the cost of any third country, least of all China,” Singh said. Aso also said the agreement was “not targeted at any third party”.

The Japanese leader said he and Singh both wanted “steady progress in bilateral relations between Japan and India, which share common basic values”.

The railway loan is the largest ever extended by Japan for a single project overseas, topping the 260 billion yen it provided to India to build the New Delhi metro.

Despite warming political ties, India and Japan both trade far more with China.—AFP