By Khanh Vu and Kiyoshi Takenaka
HANOI (Reuters) - Japan and Vietnam agreed on Monday to strengthen security and economic ties, including an agreement in principle for Japan to export military gear and technology to the Southeast Asian nation, amid concerns about China's regional assertiveness.
"It is a big step in the field of security for both countries that we reached an agreement in principle on the transfers of defence equipment and technology," Japanese Prime Minister Yoshihide Suga told reporters after meeting his Vietnamese counterpart, Nguyen Xuan Phuc, in Hanoi.
"Vietnam, which is serving as ASEAN (Association of Southeast Asian nations) chair this year, is key to realise a free and open Indo-Pacific," Suga added.
The leaders also agreed on the importance of maintaining peace, security, freedom of navigation and overflight in the South China Sea, and the peaceful settlement of disputes, Phuc said in a joint media appearance with Suga.
Vietnam and many other Southeast Asian nations have territorial disputes with China in the South China Sea.
"Vietnam welcomes Japan, a global power, to continue to actively contribute to regional and global peace, stability and prosperity," Phuc said.
Suga, who took office last month after Shinzo Abe quit because of poor health, is making his overseas diplomatic debut this week with a trip to the vital Southeast Asian nations of Vietnam and Indonesia.
In a speech later Monday, Suga said Japan opposed any steps to heighten tensions in the South China Sea.
"Regarding the South China Sea issue, it is important for all countries concerned not to rely on force or threat but to work toward peaceful resolution based on international law," Suga said, avoiding harsh anti-China rhetoric.
SUPPLY CHAIN DIVERSITY
Japan must balance its deep economic ties to China with security concerns, including Beijing's push to assert claims over disputed East China Sea isles.
ASEAN members remain wary of losing access to China's economy, and are reluctant to become entrapped in an intense confrontation between Washington and Beijing.
Japan, which ended a decades-old ban on overseas arms sales in 2014 to help strengthen the nation's military and lower the cost of home-built military equipment, has been in talks with Vietnam, Indonesia and Thailand on deals to allow such exports.
"We have to make sure the equipment and technologies transferred to Vietnam (are) to be used in a peaceful manner and contribute to regional peace," Japanese foreign ministry spokesman Tomoyuki Yoshida told a separate news briefing.
Suga's visit also coincides with Japan's efforts to diversify its supply chains and reduce reliance on China by bringing production home or moving it to Southeast Asia.
"The new coronavirus has made it even clearer that to maintain international supply chains, it is important to lower the risk of disruption and to create sustainable supply systems," Suga said.
He added that Japan would further deepen its collaboration with ASEAN in this area.
Vietnam is a popular choice for Japanese companies. Half of the 30 Japanese firms that used a 23.5 billion yen government programme to diversify supply chains in Southeast Asia targeted Vietnam, which has aggressively courted such investment.
Suga said the two countries would bolster their cooperation to mitigate the impact of the pandemic.
"We agreed on restarting 'business track' travel as well as passenger flights between the two countries today," Suga told the joint media event.
Suga also said Japan would help Vietnamese "trainees" working in Japan, many of whom are struggling as the COVID-19 outbreak hits Japanese companies.
Suga and Phuc witnessed the signing of a memorandum of understanding for Japan's Marubeni Corp to invest $1.3 billion in a power plant in Vietnam's Can Tho province and another for Tokyo Gas Co Ltd and PetroVietnam Power Corp to jointly develop a $1.9 billion gas-fired plant in Vietnam.