Conservative soulmates Narendra Modi and Shinzo Abe will hold formal talks in Tokyo Monday to cement a blossoming relationship between India and Japan, on a visit that began with a bear hug and a tour of Kyoto.

The personal chemistry on show during the five-day tour is increasingly reflected in the strengthening of bonds between two countries that bookend an ever-more assertive China.

Modi, who is hoping his market-focused policies will give a boost to India's floundering economy, could walk away with almost half a billion dollars' worth of loans for much-needed infrastructure projects, reports said.

The visit is Modi's first foreign trip outside the sub-continent and is intended to showcase the warming ties between Asia's second and third largest economies.

As well as a gamut of business deals that could see a doubling of Japanese direct investment, and the 50 billion yen in low-interest loans for new railways, highways and industrial parks, the summit will also reinforce diplomatic and defence ties.

Japanese media reported that the two premiers are likely to agree on launching a "two-plus-two" security consultative framework involving their foreign and defence ministers.

Japan already has such arrangements with the United States, Australia, Russia and France.

Both nations are wary of China's growing ambition to be seen as the regional keystone and are keen to curb its activity in the East and South China Seas and in the Indian Ocean.

Tokyo and New Delhi both have long-running territorial disputes with Beijing, which is widely viewed as having more aggressively pushed its claims in recent years.

Underlining the point, Chinese coastguard ships sailed into waters off the Japanese-controlled Senkaku islands on Monday, officials said. China calls the islands the Diaoyus.

Modi, in an address to a gathering of Japanese business leaders, said Japan and India must choose a path of peaceful development, not "18th century-style" expansionism.

"There are 18th-century-style ways and thinking that involve expanding (geographically) by taking away land of another nation and going into seas," he said through a translator, without making any specific reference to China.

"If Asia is to become the leader in the 21st century, Japan and India should lead" and promote a path of peaceful development, he said.

- 'Upgrade' -

In New Delhi, the Indian premier told Japanese media in an interview last week that the two nations could "upgrade" their relations in the fields of defence and security.

Abe and Modi are expected to agree on holding regular joint naval drills as well as exercises involving the United States, the Nikkei said Monday.

Washington is eager for the two countries to step up their cooperation by way of counterweight to China, at a time its own military commitment around the world is being questioned.

Under Abe, Japan has taken a more robust attitude to defence, massaging the self-imposed restrictions banning it from acting in defence of allies under attack and loosening restrictions on the export of military kit.

Despite huge trade volumes, Japan and China have an uneasy relationship and Tokyo is keen to reduce its dependence on Beijing for imports such as rare earths, a group of metals vital for high-tech manufacture.

That effort is expected to receive a boost Monday with an agreement for the joint production of several rare earths that could be exported to Japan.

India and Japan will also try to conclude talks on a civilian nuclear agreement that would allow Tokyo to export nuclear-related technology to New Delhi, reports have said.

Modi arrived Saturday at Kansai International Airport near the western city of Osaka by special plane for a night in nearby Kyoto.

He was greeted in Kyoto by Abe, with the two men dispensing with the formal handshake that starts most such visits in favour of a full body hug.

The pair have met on several occasions, and are thought to enjoy a personal warmth that is notably absent in Abe's dealings with US President Barack Obama.

On Sunday Abe accompanied Modi on his tour of the ancient city of Kyoto where the two strolled through the grounds of a temple more than a millennium old.