India and Japan hope to conclude a free trade agreement by the end of 2007, officials were quoted as saying on Wednesday.

Meanwhile, Japan's prime minister Shinzo Abe began talks with Indian leaders to strengthen ties between the two Asian powers, the Associated Press (AP) reported.

The proposed deal was seen as crucial to boosting trade and investment between the two countries, which have yet to forge close economic ties, the news agency said.

Indian commerce and industry minister Kamal Nath told AP he expects the agreement, which would make 90% of trade between the two countries duty free, to be concluded by the end of this year.

Japan's deputy foreign affairs minister Masaharu Kohno was quoted as saying his government would work to conclude the deal as soon as possible, but gave no time frame.

According to the report, Nath also said the Indian government would work to attract at least $US5bn (EUR3.7bn) in investment from Japan over the next five years - AP added that was an ambitious target compared to the $2.6bn (EUR1.92bn) the Japanese have invested in India over the past 15 years.

"We have had strong cultural ties and bonds of heritage, but the economic component of our relations has been weak," Nath reportedly told a meeting of nearly 200 Japanese business executives traveling with Abe who, the Associated Press noted, has often pushed Japanese firms to look beyond China and build stronger ties with India.

The news agency said it had been hoped the visit would produce major deals but, with both leaders weak after political difficulties at home, no major announcements were expected.

Abe's talks with Singh would mostly focus on a review of the progress they have made since signing a strategic partnership agreement last year, Nath told the news agency.

Under that agreement, Japan pledged to participate in a $90bn (EUR66.63bn) project to build a chain of "industrial clusters" between New Delhi and Mumbai, the report noted.

AP said the Japanese have been relatively slow to invest in India, where the economy is growing 9% annually, attracting scores of foreign investors.

The news agency noted that car makers Honda and Suzuki and electronics supplier Hitachi have recently announced plans to expand their Indian operations, but have been cautious about the size of new investments.

According to the Associated Press, a recent survey of Japanese business leaders showed most of them had no immediate plans to expand in India although they perceived it as a top investment destination - more than 50% of them cited poor infrastructure as the main hurdle.