CANBERRA - Australia and Japan could increase engagement and cooperation on defence, including in the areas of submarines and computer network operations, a latest analysis report from the Australian Strategic Policy Institute (ASPI) said on Monday.

According to the report, as the most capable of American partners in the region, Japan offers much as a closer partner to Australia. The bilateral relationship is already stron -- Japan is now one of its closest Asian security partners.

The report said that Japan's expertise in building submarines suited to Pacific operations could be of interest to Australia as it looks to replace its six Collins boats.

"In particular, Japan and Australia could increase their defence industry cooperation and ease export controls, a move that Japan has recently taken with the United Kingdom," it said.

Australia is currently examining options to replace the Collins submarine, including an all-new design or an evolution of the Collins.

"The Australian government has committed to developing a submarine propulsion testbed facility, and it would work to Australia's great advantage if one of the systems tested had significant Japanese input," ASPI's report said.