Japan and the US have blamed China for undermining efforts to keep weapons out of space with an anti-satellite missile test last month.
Downer stressed that any agreement would not commit Australia to go to Japan's aid in the event of war.
The pact would be Japan's only bilateral security agreement outside its alliance with the US.
Downer said he used a visit to Japan in August last year to propose that "some kind of a statement on security co-operation" be negotiated before Howard's visit.
"We're still in discussions with the Japanese, but they seem positive about producing a statement," Downer told Nine Network television.
"We're of the view that we need to have co-operation between out defence forces."
Downer said the agreement would not hold the status of a treaty like Australia's 56-year-old defence pact with the US, which forms the linchpin of Australian security planning.
The expected agreement is to provide for joint counter-terrorism and military exercises, regular meetings between defence officials and closer co-operation on regional issues such as North Korea's nuclear proliferation.
Japanese soldiers worked with their
Australian counterparts in Iraq [EPA]
Both Australia and the US have been pushing Japan to take a more active role in international peacekeeping, with Shinzo Abe, Japan's prime minister, determined to reform his country's pacifist post-World War II constitution.
But Downer ruled out offensive military exercises with Japan.
"If we're to have joint exercises, they'd probably focus very much more on things like disaster relief rather than the more aggressive type of military exercises we might have with the Americans," he said.
The Australian and Japanese armies have worked together in recent years in UN peacekeeping operations in Cambodia, East Timor and Iraq, despite objections from some Australian World War II veterans.
Downer said his father, former government minister Sir Alexander Downer, had suffered as a prisoner of the Japanese in Singapore for three years during World War II.
"I am acutely conscious of the sensitivities of many Australians in relation to dealing with Japan, but I take my lead from my father," he said. "You just have to move on."