Japanese PM Junichiro Koizumi has met his Indian counterpart in Delhi, with both supporting each other's claim for a permanent UN Security Council seat.
It is the first visit by a Japanese PM to India in five years
Mr Koizumi and Manmohan Singh signed a joint statement with an eight-point agenda for improved relations.
Apart from the UN issue, it called for a high-level strategic dialogue and measures to improve economic ties.
Mr Koizumi is on a three-day visit to India and on Saturday flies to Pakistan to meet President Pervez Musharraf.
Mr Koizumi's trip to India is the first by a Japanese premier there in five years.
The joint statement said the two nations "reiterated their support for each other's [UN] candidature, based on the firmly shared recognition that Japan and India are legitimate candidates for permanent membership in an expanded Security Council".
Pakistan strongly opposes India's candidature, as does China Japan's.
Brazil and Germany are also bidding for a seat.
The joint statement said India and Japan would "strive to develop closer dialogue and collaboration to secure peace, stability and prosperity in Asia".
It said the nations' navies would increase cooperation in Asian waters and the countries would hold annual prime minister-level meetings.
It also said the nations vowed to bolster bilateral trade, which has been around $4bn a year for several years.
Indian Commerce Minister Kamal Nath said Japan had been "somewhat hesitant" in investing in India.
Ties between the two countries have warmed considerably since India's nuclear tests in May 1998, which led to Japanese sanctions on India. The sanctions were lifted in 2001.
Since then India has become the largest recipient of development loans from Japan, outranking Indonesia and China.