DHAKA: Japanese PM Shinzo Abe has offered SE Asian countries almost $20bn in aid and loans, in what is being seen as an effort to combat Chinese expansion.
The announcement came at a summit in Tokyo, weeks after China`s declaration of a new air defence zone overlapping areas claimed by Japan and South Korea.
Japan seeks to rally support from the 10 Asean nations, some of whom also have territorial disputes with China.
But Indonesia said good China-Japan ties were "critical" for the region.
The Tokyo summit marks 40 years of Japan`s ties with the Association of South East Asian Nations (Asean).
`Deep concern`
Mr Abe said the financial package will be spread over five years, and will mostly take the form of concessional loans.
It will focus on development in the Mekong river region and fund transport projects.
"Together with Asean, I want to build the future of Asia where laws, rather than power, rule and people who worked hard will be rewarded - which would lead to a prosperous society with mutual respect," Mr Abe said at the start of the meeting.
"I hope we will adopt a mid- to long-term vision that would define the way Japan and Asean co-operate in the future," he added.
A joint statement between Japan and Asean is expected be issued at the end of the summit, but it remains unclear whether this will include a reference to China`s Air Defence Identification Zone (ADIZ), Kyodo news agency says.
Meanwhile, Indonesian President Susilo Bambang Yudhoyono said good relations between China and Japan were "critical to the future" of the region.
"Indonesia is deeply concerned at the prospect of the disputes erupting into open conflicts, which will have adverse impacts on all countries in the region.
"When the border negotiations are still ongoing, having an open line of communication is crucial to avoid miscalculation that may occur in and around the disputed area," he said, without mentioning a specific dispute.
The Philippines, which is involved in an ongoing row with China over islands in the South China Sea, said it was committed to freedom of flight in international airspace.
"We reiterated our commitment to uphold the rule of law, promote the peaceful settlement of disputes, and to assure freedom of flight in international airspace," Philippine President Benigno Aquino said after meeting with Mr Abe without specifically mentioning China.
Chinese Foreign Ministry spokesman Hong Lei, asked about the summit on Thursday, said the relevant countries should work to maintain regional stability.
The countries "in developing their relations, should not target third parties or hurt third-party interests", he said.
During the summit, Japan is expected to announce major loans and grants to Asean nations, local reports said.
The ADIZ over the East China Sea includes disputed islands which are controlled by Japan. It also includes a partially submerged rock claimed by South Korea.
China had said that aircraft flying through the ADIZ must follow its rules, including filing flight plans and identifying themselves.
Military aircraft from the US, Japan and South Korea have defied this, flying unannounced through the area.
Washington has called China`s declaration of an ADIZ a bid to unilaterally change the status quo in the region.
Asean groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar (Burma), the Philippines, Singapore, Thailand and Vietnam.
Source: BBC
BDST: 1256 HRS, DEC 14 , 2013
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