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Indonesian President Joko Widodo (L) and Japanese Prime Minister Shinzo Abe inspect the honour guards during a welcoming ceremony at the Bogor Palace, West Java, Indonesia January 15, 2017. REUTERS/Beawiharta

(reuters_tickers)

By Heru Asprihanto and Eveline Danubrata

BOGOR, Indonesia (Reuters) - Indonesia and Japan have agreed to step up maritime security and start discussions on a major railway project to link the Southeast Asian nation's capital and second-biggest city, the leaders of both countries said on Sunday.

Japan has historically been one of Indonesia's biggest investors, but was dealt a blow in 2015 when President Joko Widodo's government awarded China a high-speed train project linking Jakarta with the city of Bandung in West Java.

Tensions around railway deals seemed to have eased on Sunday, when Japan Prime Minister Shinzo Abe said after meeting Widodo in Bogor, south of Jakarta, that Japan will cooperate with Indonesia to build infrastructure in the railway and other sectors.

The two leaders also discussed North Korea, with Abe saying its development of nuclear capability and missiles has reached "a new level of threat".

North Korea said last week it can test launch an intercontinental ballistic missile at any time from any location set by leader Kim Jong Un, adding the United States' hostile policy was to blame for its arms development.

On South China Sea, Abe said that Japan asserts the importance of the principle of upholding the law and solving a dispute peacefully.

"The issue of South China Sea has drawn the attention of the international community and directly affects the peace in the region," Abe said.

Maritime security cooperation is of utmost importance for fellow maritime nations, Japan and Indonesia, he said.

"Japan will actively encourage cooperation in maritime security and the development of the remote islands in Indonesia."

China claims almost the entire South China Sea, through which about $5 trillion worth of trade passes each year. Brunei, Malaysia, the Philippines, Taiwan and Vietnam also have claims to parts of the sea.

While Indonesia is not part of the dispute over claims in the South China Sea, it objects to China's claim to waters around the Natuna Islands.

RAILWAY WARS

At an estimated cost of $5.5 billion, the Jakarta-Bandung line was seen in 2015 as a coup for China, which is vying for influence in the region under its "One Belt, One Road" policy and has ambitions to be a global train supplier.

The roughly 600-km (400-mile) Jakarta-Surabaya project is likely to cost less than the Jakarta-Bandung rail as the speed of the trains is slower and most of the land has been secured, according to Indonesia's transport minister.

The minister told Reuters in October that the government had invited Japan to work on the Jakarta-Surabaya project, which is aimed at slashing journey times between the capital and the East Java city by more than half to around five hours.

Japan and Indonesia also plan to develop the Masela gas block in Indonesia's Maluku Province and Patimban port in West Java, Widodo said on Sunday.

On other regional issues, Abe said North Korea's kidnapping of Japanese citizens is a very important challenge for his administration to resolve.

Pyongyang admitted in 2002 to kidnapping 13 Japanese citizens decades ago. Abe has made resolving the emotive issue a signature pledge of his political career.

(Reporting by Jakarta newsroom and Heru Asprihanto; Additional reporting by Agustinus Beo Da Costa; Writing by Eveline Danubrata; Editing by Clelia Oziel)

Reuters