Aso, the first Japanese minister to visit the Iraqi capital since the US-led invasion in 2003, said his country will continue to support Iraq's reconstruction despite pulling out its troops in July.
Japan had based 600 non-combat troops in the southern Iraqi city of Samawa for more than two years.
He also said the Japanese government was offering its help in several ways, such as providing loans "to improve the infrastructure and economic activities".
"The Japanese government will continue to support the Iraqis in the reconstruction. Our support has entered the second phase," he told reporters at a news conference with Hoshyar Zebari, the Iraqi foreign minister.
Zebari in turn described Japanese support of Iraq as "a kind of investment in the future relations between the two countries".
Japan's Kyodo News agency quoted unidentified government officials as saying that Aso was to meet with Nouri al-Maliki, the Iraqi prime minister and other senior official to discuss economic aid and security.
Aso's talks were also expected to include expanding airlift operations that Japan's air force is running between Kuwait and Baghdad, Japanese media reported. The operation recently was stepped up following the withdrawal of ground troops.
Speaking in Tokyo, Japan's chief cabinet spokesman described the situation in Baghdad as "severe" but said it did not fit the definition of a combat zone under Japanese law, meaning Japan's air force can continue its humanitarian operations there.
"I do not think the area where the Air Self-Defense Forces will be carrying out their activities is a combat zone as defined in Japan's terrorism act," Shinzo Abe told reporters Thursday.
Tokyo dispatched its troops to Iraq in 2004 - the country's largest military deployment since World War II.
They were sent under a special law because Japan's post-World War II pacifist constitution bans the country from using force to settle international disputes and restricts the military to a defensive role.
The troops focused on rebuilding roads, schools and hospitals and providing clean drinking water.